The Matching Multiplier and the Amplification of Recessions

Christina Patterson

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper shows that the unequal incidence of recessions in the labor market amplifies aggregate shocks. Using administrative data from the United States, I document a positive covariance between worker marginal propensities to consume (MPCs) and their elasticities of earnings to GDP, which is a key moment for a new class of heterogeneous-agent models. I define the Matching Multiplier as the increase in the multiplier stemming from this matching of high MPC workers to more cyclical jobs. I show that this covariance is large enough to increase the aggregate MPC by 20 percent over an equal exposure benchmark.

Keywords: Marginal Propensity to Consume; Amplification; Labor Market Inequality (search for similar items in EconPapers)
JEL-codes: E21 J11 J23 (search for similar items in EconPapers)
Pages: 78 pages
Date: 2022-06
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:22-20

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