Labor Market Dysfunction During the Great Recession

  title={Labor Market Dysfunction During the Great Recession},
  author={Kyle F. Herkenhoff and Lee E. Ohanian},
This paper documents the abnormally slow recovery in the labor market during the Great Recession, and analyzes how mortgage modification policies contributed to delayed recovery. By making modifications means-tested by reducing mortgage payments based on a borrower's current income, these programs change the incentive for households to relocate from a relatively poor labor market to a better labor market. We find that modifications raise the unemployment rate by about 0.5 percentage points, and… CONTINUE READING