Dynamic Trade-offs and Labor Supply Under the CARES Act

Corina Boar and Simon Mongey

No 27727, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: E24 J64 J68 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-dge and nep-mac
Note: EFG
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Citations: View citations in EconPapers (15)

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Working Paper: Dynamic Trade-offs and Labor Supply under the CARES Act (2020)
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