The Cyclicality of the Opportunity Cost of Employment

Gabriel Chodorow-Reich and Loukas Karabarbounis

No 19678, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E24 E32 J22 J64 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Note: EFG LS
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Published as Gabriel Chodorow-Reich & Loukas Karabarbounis, 2016. "The Cyclicality of the Opportunity Cost of Employment," Journal of Political Economy, University of Chicago Press, vol. 124(6), pages 1563-1618.

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Related works:
Working Paper: The Cyclicality of the Opportunity Cost of Employment (2015)
Working Paper: The Cyclicality of the Opportunity Cost of Employment (2014)
Working Paper: The Cyclicality of the Opportunity Cost of Employment
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