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A Three State Model of Worker Flows in General Equilibrium

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  • Rogerson, Richard
  • Sahin, Aysegul
  • Mukoyama, Toshihiko

Abstract

We develop a simple model featuring search frictions and a nondegenerate labor supply decision along the extensive margin. The model is a standard version of the neoclassical growth model with indivisible labor with idiosyncratic shocks and frictions characterized by employment loss and employment opportunity arrival shocks. We argue that it is able to account for the key features of observed labor market flows for reasonable parameter values. Persistent idiosyncratic productivity shocks play a key role in allowing the model to match the persistence of the employment and out of the labor force states found in individual labor market histories.

Suggested Citation

  • Rogerson, Richard & Sahin, Aysegul & Mukoyama, Toshihiko, 2009. "A Three State Model of Worker Flows in General Equilibrium," CEPR Discussion Papers 7425, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7425
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    More about this item

    Keywords

    Labor market frictions; Labor supply; Taxes;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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