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Do Matching Frictions Explain Unemployment? Not in Bad Times

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  • Pascal Michaillat

Abstract

This paper proposes a search-and-matching model of unemployment in which jobs are rationed: the labor market does not clear in the absence of matching frictions. This job shortage arises in an economic equilibrium from the combination of some wage rigidity and diminishing marginal returns to labor. In 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, and recruiting is easy and inexpensive, so matching frictions do not matter much. In a calibrated model, cyclical fluctuations in the composition of unemployment are large.

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 102 (2012)
Issue (Month): 4 (June)
Pages: 1721-50

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Handle: RePEc:aea:aecrev:v:102:y:2012:i:4:p:1721-50

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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. New Keynesian models and the labour market
    by Mainly Macro in Mainly Macro on 2013-08-23 13:30:00
  2. Aggregate demand and the labour market
    by Mainly Macro in Mainly Macro on 2014-07-15 15:05:00
  3. Types of unemployment
    by Mainly Macro in Mainly Macro on 2014-08-22 12:00:00
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