Resurrecting the Participation Margin
This paper considers a real business cycle model with search frictions in the labor market and labor supply which is elastic along the participation margin. Previous authors have found that such models generate counterfactually procyclical unemployment and a positively-sloped Beveridge curve. This paper presents a calibrated model which succeeds at generating countercyclical unemployment and a negatively-sloped Beveridge curve despite the presence of a participation margin.
June 2008 Paper Number CEPDP0873
This CEP discussion paper is published under the centre's programme.