Research / BFI Working PaperAug 19, 2020

Dynamic Trade-offs and Labor Supply under the CARES Act

Corina Boar, Simon Mongey

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.

More Research From These Scholars

BFI Working Paper Apr 18, 2023

Merger Guidelines for the Labor Market

David W. Berger, Thomas Hasenzagl, Kyle F. Herkenhoff, Simon Mongey, Eric Posner
Topics:  Employment & Wages
BFI Working Paper Apr 30, 2021

Quantifying Market Power and Business Dynamism

Jan De Loecker, Jan Eeckhout, Simon Mongey
Topics:  Uncategorized
White Paper Apr 2, 2020

Characteristics of Workers in Low Work-From-Home and High Personal-Proximity Occupations

Simon Mongey, Alex Weinberg
Topics:  COVID-19, Employment & Wages