Older Married Workers and Nonstandard Jobs: The Effects of Health and Health Insurance

We examine the effects of health and health insurance coverage on older married workers' decisions to work in temporary, contract, part-time, self-employment, and regular full-time jobs. We model the behavior of older married workers as interdependent, showing that one spouse's health and insurance status affects the employment of the other. In general, we find that men and women are less likely to be employed in regular full-time jobs when they are in fair or poor health and are more likely to be in regular full-time employment when their spouses are in poor health.     

Overreactions in the Options Market

This paper examines the “term structure” of options' implied volatilities, using data on S&P 100 index options. Because implied volatility is strongly mean reverting, the implied volatility on a longer maturity option should move by less than one percent in response to a one percent move in the implied volatility of a shorter maturity option. Empirically, this elasticity turns out to be larger than suggested by rational expectations theory—long-maturity options tend to “overreact” to changes in the implied volatility of short-maturity options.     

Promote Internally or Hire Externally? The Role of Gift Exchange and Performance Measurement Precision

Managers often face the choice between promoting an internal employee and hiring an external candidate. Using an interactive experiment, we examine the drivers of managers’ promote/hire decisions and internal employees’ behavior before and after those decisions. Consistent with gift exchange theory, we find that employees exert costly effort to increase the chance of being promoted, and they raise their effort level as the promote/hire decision becomes imminent. Managers respond by promoting those who exert high effort, despite employees’ inferior ability compared to external candidates. Results suggest that managers view employees’ past effort as both a gift to reciprocate and a signal of their future effort. Moreover, we find that managers are more likely to promote internally rather than hire externally under a less precise performance measurement system, and this result is driven by managers who observe low employee output. Finally, we find that total effort is significantly higher when managers promote internally versus hire externally.     

Forecasting National Recessions Using State‐Level Data

We investigate whether there is information useful for identifying U.S. business cycle phases contained in subnational measures of economic activity. Using a probit model to forecast the National Bureau of Economic Research expansion and recession classification, we assess the incremental information content of state‐level employment growth over a commonly used set of national‐level predictors. As state‐level data adds a large number of predictors to the model, we employ a Bayesian model averaging procedure to construct forecasts. Based on a variety of forecast evaluation metrics, we find that including state‐level employment growth substantially improves nowcasts and very short‐horizon forecasts of the business cycle phase. The gains in forecast accuracy are concentrated during months of national recession.