The Cyclicality of the Opportunity Cost of Employment

Gabriel Chodorow-Reich and Loukas Karabarbounis

No 514, Staff Report from Federal Reserve Bank of Minneapolis

Abstract: The flow opportunity cost of moving from unemployment to employment consists of foregone public benefits and the foregone value of non-working time in units of consumption. We construct a time series of the opportunity cost of employment using detailed microdata and administrative or national accounts data to estimate benefit levels, eligibility and take-up of benefits, consumption by labor force status, hours per worker, taxes, and preference parameters. Our estimated opportunity cost is procyclical and volatile over the business cycle. The estimated cyclicality implies far less unemployment volatility in many leading models of the labor market than that observed in the data, irrespective of the level of the opportunity cost.

Keywords: Opportunity cost of employment; Unemployment fluctuations (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 61 pages
Date: 2015-08-26
New Economics Papers: this item is included in nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

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Related works:
Journal Article: The Cyclicality of the Opportunity Cost of Employment (2016)
Working Paper: The Cyclicality of the Opportunity Cost of Employment (2014)
Working Paper: The Cyclicality of the Opportunity Cost of Employment (2013)
Working Paper: The Cyclicality of the Opportunity Cost of Employment
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmsr:514

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