Carrillo-Tudela, Carlos and Visschers, Ludo (2012): Unemployment and Endogenous Reallocation over the Business Cycle.
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We build an analytically and computationally tractable stochastic equilibrium model of unemployment in heterogeneous labor markets. Facing search frictions within markets and reallocation frictions between markets, workers endogenously separate from employment and endogenously reallocate between markets, in response to changing aggregate and local conditions. Empirically, using the 1986-2008 SIPP panels, we document the occupational mobility patterns of the unemployed, ﬁnding notably that occupational change of unemployed workers is procyclical. The heterogeneous-market model yields highly volatile countercyclical unemployment, and is simultaneously consistent with procyclical reallocation, countercyclical separations and a negatively-sloped Beveridge curve. Moreover, the model exhibits unemployment duration dependence, which (when calibrated to long-term averages) responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, the model is also consistent with different employment and reallocation outcomes as workers gain experience in the labor market, on average and over the business cycle.
|Item Type:||MPRA Paper|
|Original Title:||Unemployment and Endogenous Reallocation over the Business Cycle|
|Keywords:||Unemployment; Business Cycle; Search; Endogenous Separations; Reallocation; Occupational Mobility|
|Subjects:||J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J62 - Job, Occupational, and Intergenerational Mobility
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
|Depositing User:||Ludo Visschers|
|Date Deposited:||11. Jan 2013 00:12|
|Last Modified:||18. Feb 2013 20:07|
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