Benjamin Schoefer

Assistant Professor of Economics

2018/19: on sabbatical visiting Stanford University.

Conference: Workshop on Firms, Jobs, and Inequality, December 2018



  • Econ 236B: Macroeconomics (second-year field course)
  • Econ 202B: Macroeconomic Theory (mandatory first-year PhD course)
  • Econ 237: Macroeconomics Research Seminar
  • Econ 101B: Intermediate Macroeconomics (Honors)

Selected Research in Progress

  • Employment Fluctuations and Congestion (with Petr Sedlacek)
  • Wages and Unemployment Insurance (with Simon Jäger, Sammy Young and Josef Zweimüller)
  • Recruitment Costs and Labor Market Tightness (with Daphne Skandalis)
  • Producer Prices and Labor Costs (with Michael Weber)
  • Household Consumption and Housing Wealth Shocks: New Evidence from a Micro-Instrument (with Amir Kermani)


  • Wages and the Value of Nonemployment (working paper, 2018; with Simon Jaeger, Samuel Young and Josef Zweimueller)
  • NBER Working Paper 25230
  • Abstract: Nonemployment is often posited as a worker’s outside option in wage setting models such as bargaining and wage posting. The value of this state is therefore a fundamental determinant of wages and, in turn, labor supply and job creation. We measure the effect of changes in the value of nonemployment on wages in existing jobs and among job switchers. Our quasi-experimental variation in nonemployment values arises from four large reforms of unemployment insurance (UI) benefit levels in Austria. We document that wages are insensitive to UI benefit levels: point estimates imply a wage response of less than $0.01 per $1.00 UI benefit increase, and we can reject sensitivities larger than 0.03. In contrast, a calibrated Nash bargaining model predicts a sensitivity of 0.39 – more than ten times larger. The empirical insensitivity holds even among workers with a priori low bargaining power, with low labor force attachment, with high predicted unemployment duration, among job switchers and recently unemployed workers, in areas of high unemployment, in firms with flexible pay policies, and when considering firm-level bargaining. The insensitivity of wages to the nonemployment value we document presents a puzzle to widely used wage setting protocols, and implies that nonemployment may not constitute workers’ relevant threat point. Our evidence supports wage-setting mechanisms that insulate wages from the value of nonemployment.

  • Marginal Jobs and Job Surplus: Evidence from Separations and Unemployment Insurance (working paper, 2018; with Simon Jaeger and Josef Zweimueller)
  • Abstract: We study the role of marginal jobs in employment adjustment, in three steps. First, we provide evidence on job destruction in response to reductions in job surplus from improved worker outside options. Our design exploits a sharp quasi-experimental increase in unemployment benefits for older workers in Austria. The treatment effect is larger for workers with larger outside option increases, proxied for with their ex-ante risk of exhausting the pre-reform maximum benefit duration when unemployed. Second, we isolate and characterize the marginal matches driving this separation response, extending complier analysis to difference-in-difference settings. We find that marginal jobs originate from blue- collar occupations in industries with a high incidence of sickness and disability among older workers. Compared to surviving jobs, marginal jobs had lower earnings and lower worker fixed effects and were more prevalent in shrinking industries and firms. Taken together, our findings indicate that increasing workers’ outside options destroys low-surplus jobs. Third, one direct implication is that outside options shift the composition of surviving jobs towards higher-surplus jobs. To test this prediction, we exploit the abolition of the reform to show that the formerly-treated cohorts indeed exhibit lower extensive-margin aggregate elasticities to subsequent labor demand shocks – due to the missing mass of marginal matches the reform had previously destroyed.

  • The Short-Run Aggregate Labor Supply Curve with Long-Term Jobs (working paper, 2018; with Preston Mui)
  • Abstract: The macroeconomic narrative of recessions driving households off their labor supply curve derives its empirical support from the gap between acyclical average wages and the decline in households’ marginal rate of substitution. The underlying theoretical framework of this result relies on single-period, spot-market jobs. By contrast, taking into account long-term jobs implies that the extensive-margin of labor supply is driven by the present value of wage contracts in new jobs. In the data, wages in new jobs are more procyclical than average wages; smooth average wages largely reflect sticky legacy wage contracts no longer available to new hires. When considering this procyclical time series of allocative new wage contracts, households’ implied desired labor supply aligns more closely with observed employment fluctuations, even with small, microempirically consistent Frisch labor supply elasticities. An alternative interpretation of this finding is that excess labor supply is in fact countercyclical, but the model underlying the short-run aggregate labor supply curve remains misspecified for other reasons.

  • A Price-Theoretical Framework for Fluctuations in Matching Models (2017; with Yusuf Mercan)
  • Abstract: We formulate a price-theoretical comparative static that characterizes labor market fluctuations of a broad spectrum of matching model variants. Our conceptual framework is simple, intuitive, transparent and general – and thereby complements the (heavily parametric and model-specific) “fundamental surplus” approach by Ljungqvist and Sargent (2016). Exactly four reduced-form amplification factors fully determine the elasticity of labor market tightness to a driving force such as the canonical productivity shocks: (1) The numerator captures the partial effect of the shock on the payoff from hiring, net of direct, bargaining-driven wage effects. The denominator captures the slope of total labor costs with regards to the response of labor market tightness, and consists of two components. (2) The (steep) recruitment cost curve, which arises from congestion in the matching process. (3) The (typically flat) wage curve, which arises from bargaining and labor supply. (4) These two cost curves are weighted by the share of recruitment costs in total labor costs. Matching amplification arises whenever the cost curves are flat or when the pass-through of the shock into the payoff is large. We conduct a meta study of leading matching model variants in the literature, and decompose each model’s cyclical behavior into these four reduced-form amplification factors, despite their vastly different structural features. In that realm, the framework also provides new insights. For example, we find that the smaller the recruitment-cost share is – i.e. the “less important” matching frictions loom in a firm’s cost structure –, the more amplification is predicted by the model. This surprising result arises from the fact that the wage curve is typically calibrated to be flatter than the recruitment cost curve. We confirm this prediction by measuring cross-industry variation in the recruitment cost share and relating it to the estimated industry-level employment elasticity to productivity shocks. Also, our framework clarifies why exclusively in the Nash bargaining case the “fundamental surplus” of Ljungqvist and Sargent (2016) appears to singularly drive amplification: In the Nash case, it happens to determine both the recruitment cost share and the wage curve. Finally, by being empirically tangible, our four reduced-form amplification factors are useful joint calibration targets, complementing the standard parameter-by-parameter approach.

  • Payroll Taxes, Firm Behavior, and Rent Sharing: Evidence from a Young Workers Tax Cut in Sweden
  • with Emmanuel Saez and David Seim)
  • American Economic Review, forthcoming
  • Abstract: This paper uses administrative data to analyze a large and long-lasting employer payroll tax rate cut from 31% down to 15% for young workers (aged 26 or less) in Sweden. We find a zero effect on net-of-tax wages of young treated workers relative to slightly older untreated workers, even in the medium run (after six years). Simple graphical cohort analysis shows compelling positive effects on the employment rate of the treated young workers, of about 2–3 percentage points, which arise primarily from fewer separations (rather than more hiring). These employment effects are larger in places with initially higher youth unemployment rates. We also analyze the firm-level effects of the tax cut. We sort firms by the size of the tax windfall and trace out graphically the time series of firm outcomes. We proxy a firm’s windfall with its share of treated young workers just before the reform. First, heavily treated firms expand after the reform: employment, capital, sales, value added, and profits all increase. These effects appear stronger in credit-constrained firms, consistent with liquidity effects. Second, heavily treated firms increase the wages of all their workers – young as well as old – collectively, perhaps through rent sharing. Wages of low paid workers rise more in percentage terms. Rather than canonical market- level adjustment, we uncover a crucial role of firm-level mechanisms in the transmission of payroll tax cuts.

  • The Financial Channel of Wage Rigidity (working paper, 2016)
  • Abstract: Why do firms cut hiring so sharply in recessions? I propose that wage rigidity among incumbent workers forces firms to reduce hiring by squeezing their internal funds. Incumbents' wage rigidity is an irrelevant fixed cost in standard macroeconomic models, which instead rely on wage rigidity among new hires. But much empirical evidence indicates that the wages of new hires, unlike those of incumbents, display little rigidity. I integrate financial constraints and incumbents' wage rigidity -- but flexible wages among new hires -- into the Diamond-Mortensen-Pissarides matching model. The interaction between these two frictions helps the calibrated model account for more than half of hiring fluctuations in the U.S. data. My empirical analyses support the financial channel of wage rigidity. I present new firm-level evidence that employment responds to cash flow shocks, and that internal funds help firms stabilize employment during recessions. Moreover, I calculate that a slight increase in incumbents' wage procyclicality could smooth aggregate profits and internal funds.

  • The Role of Quits and Replacement Hiring in the Cyclicality of Job Openings (with Yusuf Mercan, 2018)
  • New draft coming soon
    Abstract: This paper investigates how the procyclicality of quits, through the replacement vacancies they entail, amplifies the cyclical fluctuations of total job openings. Using a unique employer survey, we establish that more than half of all job openings aim to fill an old job vacated by a quit. By contrast, in the leading macro-labor models, all job openings are for new jobs, and quits do not entail replacement hiring. In our extended model, the quit–replacement mechanism can generate considerable cyclical amplification of fluctuations in total vacancies. The amplification relies on imperfect crowd-out of new job creation from replacement hiring, for which we enlist empirical support from local labor market adjustments.

  • Regulation and taxation: A complementarity.” Journal of Comparative Economics 38.4 (2010): 381-94.
  • Abstract: I show how quantity regulation can lower elasticities and thereby increase optimal tax rates. Such regulation imposes regulatory incentives for particular choice quantities. Their strength varies between zero (laissez faire) and infinite (command economy). In the latter case, regulation effectively eliminates any intensive behavioral responses to taxes; a previously distortionary tax becomes a lump sum. For intermediate regulation (where some deviation is feasible), intensive behavioral responses are still weaker than under zero regulation, and so quantity regulation reduces elasticities, thereby facilitating subsequent taxation. I apply this mechanism to labor supply and present correlational evidence for this complementarity: hours worked in high-regulation countries are compressed, and these countries tax labor at higher rates.