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Business cycles, unemployment insurance, and the calibration of matching models Author info | Abstract | Publisher info | Download info | Related research | Statistics Costain, James S.
Reiter, Michael
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This paper theoretically and empirically documents a puzzle that arises when an RBC economy with a job matching function is used to model unemployment. The standard model can generate sufficiently large cyclical fluctuations in unemployment, or a sufficiently small response of unemployment to labor market policies, but it cannot do both. Variable search and separation, finite UI benefit duration, efficiency wages, and capital all fail to resolve this puzzle. However, either sticky wages or match-specific productivity shocks can improve the model's performance by making the firm's flow of surplus more procyclical, which makes hiring more procyclical too.
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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control .
Volume (Year): 32 (2008)
Issue (Month): 4 (April)
Pages: 1120-1155
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Handle: RePEc:eee:dyncon:v:32:y:2008:i:4:p:1120-1155Contact details of provider: Web page: http://www.elsevier.com/locate/jedc
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Paper James S. Costain & Michael Reiter, 2003.
"Business Cycles, Unemployment Insurance, and the Calibration of Matching Models ,"
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"Business Cycles, Unemployment Insurance, and the Calibration of Matching Models ,"
CESifo Working Paper Series
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references Cited by : (explanations , Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile , click on "citations" and make appropriate adjustments.)
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