“We offer weekly pay”: Paycheck frequency and the need for liquidity of American workers [Paper]
Updated
Abstract
I study how the paycheck timing of workers affects consumption dynamics via labor market outcomes. Using U.S. micro data, I document that weekly-paid workers tend to have less fluctuating intra-month expenditure patterns, earn lower hourly wages, and have less liquid wealth than comparable biweekly-paid ones. I propose a novel mechanism: paycheck frequency is a job amenity because more frequent paychecks relax short-run liquidity needs. To study this channel, I develop a directed labor search model with borrowing constraints and intra-month consumption smoothing. In equilibrium, low-liquidity workers sort into weekly-paying jobs, accepting lower wages in exchange for more frequent access to income. The calibrated model implies that liquidity differences account for most of the expenditure gap across pay-frequency groups. Ignoring heterogeneity in pay frequency risks overestimating the marginal propensity to consume at the lowest wealth quintile by 17%.
Working papers
Unemployment benefits and consumption smoothing: Cross-state study from the U.S. [Draft]
January 2024
Abstract
Unemployment insurance programs have three common parameters: weekly benefit amount, potential benefit duration, and payment frequency. Exploiting
variations in these dimensions across American states over time as well as deterministic kinks in the policy schedule, I study their effects on the ability of
unemployed workers to smooth their consumption relative to that in employment periods. Using quarterly micro data, I find that weekly benefit amount
plays the most important role in helping unemployed workers smooth consumption, namely in food and nondurables. Payment frequency also has a modest
smoothing effect, while potential benefit duration rarely plays a significant role.
Work in Progress
Trade Liberalization and the Supply of Productive Skills
Search and Temporary Jobs: Effects on Wage Inequality of Fixed-Term Employment
Pre-PhD Research
The Cost Channel Effect of Monetary Transmission: How Effective Is the ECB's Low Interest Rate Policy for Increasing Inflation?
with Dorothea Schäfer and Andreas Stephan
Discussion Paper 1654, DIW Berlin, 2017
Determinants of Net Interest Margin of Commercial Banks in Vietnam
with Vu Thi Dan Tra
Journal of Economics and Development, 17(2), 2015