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Dynamic Trade-offs and Labor Supply under the CARES Act

Corina Boar (corina.boar@nyu.edu) and Simon Mongey
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Corina Boar: New York University - Department of Economics

No 2020-112, Working Papers from Becker Friedman Institute for Research In Economics

Abstract: The CARES Act resulted in many unemployed workers receiving benefits that exceeded wages at their previous job. Given this, would an unemployed worker reject an offer to return to their former job at the same wage? Qualitatively, we provide a very simple dynamic model that incorporates four reasons the answer could be ‘no’: (i) the temporary nature of the CARES Act, (ii) uncertainty that their return-to-work offer might expire, (iii) search frictions, and (iv) wage losses out of unemployment in a recession. Quantitatively, when evaluated under empirically relevant parameters, we find it unlikely a worker would reject an offer to return to work at the same wage. We show special cases where this is not true and relate these to anecdotal evidence.

Pages: 14 pages
Date: 2020
New Economics Papers: this item is included in nep-dge
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Citations: View citations in EconPapers (17)

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