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Kyle Herkenhoff, University of Minnesota

Posted on 2014-11-27 in Upcoming Seminars
Apr 8, 2015

Prof. Kyle Herkenhoff, University of Minnesota, Department of Economics, will present a seminar.

Title: "How Credit Constraints Impact Job Finding Rates, Sorting & Aggregate Output"

Abstract: How do fluctuations in consumer credit constraints impact the types of jobs that displaced workers take, and how does this subsequently affect productivity, output, and employment? Our first contribution is to estimate the impact of consumer credit constraints on job finding rates and subsequent replacement wages of displaced workers using new administrative data. We find that medium-tenure displaced mortgagors, in response to a $1,000 credit limit increase, take .5 to 1 week longer to find a job but obtain a wage replacement rate that is 2 to 4% greater. Our second contribution is to develop a dynamic general equilibrium labor sorting model with credit constraints. By using directed search in the labor market, the model handles rich heterogeneity among both consumers and firms, and yet still produces tractable dynamics in response to aggregate shocks. We calibrate the model using our new empirical results, and we find that easing credit constraints during a recession by reducing real-interest rates by 3% increases measured labor productivity by 1/10% and increases overall output by 1/4%.

Location: Timlin Room (Arts 807)

Time: 4:00 pm

This is part of the Department of Economics Seminar Series. Everyone is welcome.