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What do Information Frictions do? Author info | Abstract | Publisher info | Download info | Related research | Statistics Joydeep Bhattacharya () (Iowa State University Economics Department)
Shankha Chakraborty () (University of Oregon Economics Department)
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Numerous researchers have incorporated labor or credit market frictions within simple neoclassical models to (i) facilitate quick departures from the Arrow-Debreu world, thereby opening up the role for institutions, (ii) inject some realism into their models, and (iii) explain cross country differences in output and employment. We present an overlapping generations model with production in which a labor market friction (moral hazard) coexists along with a credit market friction (costly state verification). The simultaneous presence and interaction of these two frictions is studied. We show that credit frictions have a multiplier effect on economic activity, by directly affecting investment and indirectly through the unemployment rate. The labor market friction, on the other hand, affects unemployment in the short- and long-run but has only a short-run effect on capital accumulation.
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Paper provided by University of Oregon Economics Department in its series University of Oregon Economics Department Working Papers with number
2003-4.
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Length: 33
Date of creation: 14 Feb 2003Date of revision:
Handle: RePEc:ore:uoecwp:2003-4Contact details of provider: Postal: 1285 University of Oregon, 435 PLC, Eugene, OR 97403-1285 Phone: (541) 346-4661 Fax: (541) 346-1243 Email: Web page: http://economics.uoregon.edu/ More information through EDIRC
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Keywords: Information Frictions Credit Frictions Efficiency Wage Unemployment Other versions of this item:
Article Paper Shankha Chakraborty & Joydeep Bhattacharya, 2004.
"What do information frictions do? ,"
Econometric Society 2004 North American Summer Meetings
41, Econometric Society.
[Downloadable!] Bhattacharya, Joydeep & Chakraborty, Shankha, 2003.
"What do Information Frictions do? ,"
Staff General Research Papers
10254, Iowa State University, Department of Economics.
[Downloadable!] Bhattacharya, J. & Chankraborty, S., 2003.
"What do information frictions do? ,"
Discussion Paper
21, Tilburg University, Center for Economic Research.
[Downloadable!] Find related papers by JEL classification: E00 - Macroeconomics and Monetary Economics - - General - - - General G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports :
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repec:hal:journl:hal-00243037_v1 is not listed on IDEAS
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