This paper develops a model according to which the costs of business cycles are nontrivial because they reduce the average level of output. The reason is an interaction between job creation costs and an agency problem. The agency problem triggers separations during economic downturns even though...

This paper summarizes statistics on the key aspects of the distribution of earnings levels and earnings changes using administrative (social security) data from Italy between 1985 and 2016. During the time covered by our data, earnings inequality and earnings volatility increased, while earnings...

Three features of real-life reforms of dual employment protection legislation (EPL) systems are particularly hard to study through the lens of standard labor-market search models: (i) the excess job turnover implied by dual EPL, (ii) the nonretroactive nature of EPL reforms, and (iii) the...

Precautionary pricing and increasing markups in representative-agent DSGE models with nominal rigidities are commonly used to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with the data. Three things stand out. First,...

In this paper, we build a new test of rational expectations based on the marginal distributions of realizations and subjective beliefs. This test is widely applicable, including in the common situation where realizations and beliefs are observed in two different data sets that cannot be matched....

Hiring is a costly activity reflecting firms' investment in their workers. Microdata show that hiring costs involve production disruption. Thus, cyclical fluctuations in the value of output, induced by price frictions, have consequences for the optimal allocation of hiring activities. We outline...

Capital reallocation between firms is procyclical and leads to variations in measured aggregate productivity. In this paper, we ask how much of the cyclical variation in measured productivity is the consequence of capital reallocation. We build a heterogeneous-firm model to study the effects of...

This paper studies how tax-and-transfer progressivity influences aggregate fluctuations when interacting with household heterogeneity. Using a simple static model of the extensive margin labor supply, we analytically characterize how a degree of progressivity influences differential labor supply...

We characterize the salient features of the distribution of (log) earnings of formal workers in Mexico using social security records for the period 2005-2019. The analysis is based on a nonparametric approach and is focused primarily on the properties of the distribution of earnings changes. We...