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CentrePiece article
Jobs in a recession
Pascal Michaillat
May 2012
Paper No' CEPCP365:
Full Paper (pdf)

CentrePiece 17 (1) Spring 2012

JEL Classification: E24; E32; J64

Tags: unemployment; matching frictions; job rationing

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.