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Unemployment and Endogenous Reallocation over the Business Cycle

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  • Ludo Visschers

    (U. Carlos III, Madrid)

  • Carlos Carrillo-Tudela

    (U. Essex)

Abstract

This paper presents a tractable stochastic general equilibrium model in which to study different types of unemployment over the business cycle. In our model workers face search frictions on their local labor markets and reallocation frictions across labor markets. The interaction of these two types of frictions is shown to have important implications for the analysis of resource allocation over the business cycle. We focus attention on (i) the impact on the aggregate unemployment rate, and its decomposition into search, rest, reallocation and job separation components; (ii) the expected duration of unemployment; and (iii) how the interaction between search and reallocation frictions affects the cyclicality of job separations and worker reallocations over the business cycle. We use this framework to quantitatively assess the relative contributions of the different sources of unemployment in explaining the unemployment rate and its cyclical properties.

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Bibliographic Info

Paper provided by Society for Economic Dynamics in its series 2011 Meeting Papers with number 1101.

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Date of creation: 2011
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Handle: RePEc:red:sed011:1101

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Citations

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Cited by:
  1. Regis Barnichon & Andrew Figura, 2013. "Labor Market Heterogeneity and the Aggregate Matching Function," Working Papers 727, Barcelona Graduate School of Economics.
  2. Plamen Nenov, 2013. "Regional Mismatch and Labor Reallocation in an Equilibrium Model of Migration," 2013 Meeting Papers 565, Society for Economic Dynamics.
  3. Jacob Wong, 2012. "Aggregate Reallocation Shocks and the Dynamics of Occupational Mobility and Wage Inequality," School of Economics Working Papers 2012-04, University of Adelaide, School of Economics.
  4. Damba Lkhagvasuren & Roy Nitulescu, 2011. "Sectoral Mobility and Unemployment with Heterogeneous Moving Costs," Working Papers 13003, Concordia University, Department of Economics, revised 14 May 2013.
  5. Maximiliano Dvorkin, 2013. "Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets," 2013 Meeting Papers 1229, Society for Economic Dynamics.
  6. Carrillo-Tudela, Carlos & Hobijn, Bart & Visschers, Ludo, 2014. "Career changes decline during recessions," FRBSF Economic Letter, Federal Reserve Bank of San Francisco.
  7. Bauer, Anja, 2013. "Mismatch unemployment : evidence from Germany 2000-2010," IAB Discussion Paper 201310, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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