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My paper "Gross Worker Flows and Fluctuations in the Aggregate Labor Market" (joint with @KrusellPer, Richard Rogerson, and Aysegul Sahin) is forthcoming at RED. Here is the "Share Link" (free download until October 2, 2020): https://authors.elsevier.com/c/1bZV6_OuHZGEHW
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This paper is a part of "Cooley volume special issue," edited by @Jonheathcote and Vincenzo Quadrini. Personally I feel very much honored to be a part of it; I still remember picking up "Frontier of Business Cycle Research" at the shelf of the Maruzen bookstore in Tokyo.
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I was a 2nd year MA student in Tokyo and no one taught RBC-style macro in Tokyo back then, and bought it without knowing it was such a famous book. I've been learning from it since then. I'd also like to thank the editors and Mark Bils, who was the discussant, for comments.
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This paper is a part of decade-long project with the same set of wonderful coauthors. The first paper was published in JME 2008 https://www.sciencedirect.com/science/article/pii/S0304393208000469 and it is also explained in the Ljungqvist and Sargent textbook (Chapter 31). Our goal was to build a model that features
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labor market frictions and labor supply margin - having both DMP and RBC worlds. We showed some useful theoretical results, but quantitatively the model failed to replicate the persistence of employment. The issue was resolved in the JET 2011 paper https://www.sciencedirect.com/science/article/pii/S0022053110001420
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by introducing heterogeneity in individual productivity. There we are more explicit about mapping the model to the three states (E, U, and N) in the data. We ran experiments in QE 2010 paper http://www.qeconomics.org/ojs/index.php/qe/article/view/4 and there we see how frictions and labor supply interact.
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In the AER 2017 paper https://www.aeaweb.org/articles?id=10.1257/aer.20121662 we look at how these two margins interact in business cycle context, roughly mapping frictions w/ unemployment and labor supply w/ participation margin. The model matches the properties of worker flows across 3 states very well.
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Finally in this RED forthcoming paper, we look at the GE version of the AER model. We tried GE before (in NBER WP 2012 - a bit different model) but this time it was a lot easier to compute and we could run different counterfactuals thanks to the newer computational method.
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These projects with this team started in 2007, but for me personally, this was a natural line of research from the time I wrote papers (with different coauthors with some overlap) https://www.sciencedirect.com/science/article/pii/S030439320600136X and https://www.sciencedirect.com/science/article/pii/S1094202509000039. There we had to make assumptions
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about what will happen to the idiosyncratic unemployment shocks (the most important risks individuals face) in the world without business cycles, because these shocks were exogenously given. The most natural way forward was introducing the DMP structure, and it was done in
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REStud 2010 https://academic.oup.com/restud/article-abstract/77/4/1477/1644628. But there we noticed that some workers could prefer to stop working once they accumulate enough capital (a natural labor supply margin). This issue lead to the start of this entire line of project (starting from the JME 2008 paper).
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It has been a long journey but it continues! One issue we didn't deal with was the life cycle - the worker flows across E, U, and N exhibit strong life cycle patterns. This fact is documented and analyzed in the WP with Tomaz Cajner and Ilhan Guner https://toshimukoyama.github.io/MyWebsite/CGM.pdf
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There are a lot more to be done! I've learned a lot from working through these research projects, especially from my wonderful coauthors. And I'm looking forward to more learning in the coming years!
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