Faithin Omaha eBook Collection

Download or read book Worker Heterogeneity, Selection, and Employment Dynamics in the Face of Aggregate Demand and Pandemic Shocks written by Federico Ravenna and published by . This book was released on 2020 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: In a new Keynesian model with random search in the labor market, endogenous selection among heterogeneous workers amplifies fluctuations in unemployment and results in excess unemployment volatility relative to the efficient allocation. Recessions disproportionately affect low-productivity workers, whose unemployment spells are inefficiently frequent and long. We consider a COVID-recession resulting from a negative demand shock and a surge in exogenous separations. High-productivity workers benefit if separations in a pandemic take the form of temporary layoffs, but this is not true for low-productivity workers. The unemployment consequences are especially severe when nominal interest rates are close to the effective lower bound.