Abstract for:

Jobs in a recession

Pascal  Michaillat,  May 2012
Paper No' CEPCP365: | Full paper

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Keywords: Unemployment; matching frictions; job rationing

JEL Classification: E24; E32; J64

Is hard copy/paper copy available? YES - Paper Copy Still In Print.

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This Paper is published under the following series: CentrePiece Magazine

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Abstract:

This article is based on a paper that models unemployment as the result of matching frictions and job rationing. Job rationing is a shortage of jobs arising naturally in an economic equilibrium from the combination of some wage rigidity and diminishing marginal returns to labor. During recessions, job rationing is acute, driving the rise in unemployment, whereas matching frictions contribute little to unemployment. Intuitively, in recessions jobs are lacking, the labor market is slack, recruiting is easy and inexpensive, so matching frictions do not matter much. In a calibrated model, cyclical fluctuations in the composition of unemployment are quantitatively large.


CentrePiece 17 (1) Spring2012 pages: 3-7