Department of Economics Seminar with Professor Antonella Trigari, Bocconi University Temporary Layoffs, Loss-of-Recall, and Cyclical Unemployment Dynamics

Antonella Trigari is a Professor of Economics at Bocconi University and a research fellow at the CEPR and IGIER. Her research area is monetary and macroeconomics, in which she has a particular focus on the role of labour market frictions. She has published many important papers in journals such as the AER, REStud, JPE, JFE, JEEA, and JME.

Abstract: We revisit the role of temporary layoffs in the business cycle, motivated by their unprecedented surge during the pandemic recession. We first measure the contribution of temporary layoffs to unemployment dynamics over the period 1979 to the present. While many have emphasized a stabilizing effect due to recall hiring, we quantify an important destabilizing effect due to “loss-of-recall”, whereby workers in temporary-layoff unemployment lose their job permanently and do so at higher rates in recessions. We then develop a quantitative model that allows for endogenous flows of workers across employment and both temporary-layoff and jobless unemployment.

The model captures well pre-pandemic unemployment dynamics and shows how loss-of-recall enhances the recessionary contribution of temporary layoffs. We also show that with some modification the model can capture the pandemic re-cession. We then use our structural model to show that the Paycheck Protection program generated significant employment gains. It did so in part by significantly reducing loss-of-recall.