The labor market and macro volatility: a nonstationary general-equilibrium analysis
The evolution of the aggregate labor market is far from smooth. I investigate the success of a macro model in replicating the observed levels of volatility of unemployment and other key variables. I take variations in productivity growth and in exogenous product demand (government purchases plus net exports) as the primary exogenous sources of fluctuations. The macro model embodies new ideas about the labor market, all based on equilibrium—the models I consider do not rest on inefficiency in the use of labor caused by an inappropriate wage. I find that non-standard features of the labor market are essential for understanding the volatility of unemployment. These models include simple equilibrium wage stickiness, where the sticky wage is an equilibrium selection rule. A second model based on modern bargaining theory delivers a different kind of stickiness and has a unique equilibrium. A third model posits fluctuations in matching efficiency that may arise from variations over time in the information about prospective jobs among job-seekers. Reasonable calibrations of each of the three models match the observed volatility of unemployment.
Volume (Year): (2006)
Issue (Month): ()
|Contact details of provider:|| Postal: P.O. Box 7702, San Francisco, CA 94120-7702|
Phone: (415) 974-2000
Fax: (415) 974-3333
Web page: http://www.frbsf.org/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
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.:
- Lucas, Deborah J., 1994. "Asset pricing with undiversifiable income risk and short sales constraints: Deepening the equity premium puzzle," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 325-341, December.
- Hall, Robert E, 1988.
"Intertemporal Substitution in Consumption,"
Journal of Political Economy,
University of Chicago Press, vol. 96(2), pages 339-357, April.
- Mortensen, Dale & Pissarides, Christopher, 2011.
"Job Creation and Job Destruction in the Theory of Unemployment,"
Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19-19.
- Dale T. Mortensen & Christopher A. Pissarides, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Oxford University Press, vol. 61(3), pages 397-415.
- Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
- Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
- Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
- Robert E. Hall, 1987. "Consumption," NBER Working Papers 2265, National Bureau of Economic Research, Inc.
- Alexopoulos, Michelle, 2004. "Unemployment and the business cycle," Journal of Monetary Economics, Elsevier, vol. 51(2), pages 277-298, March.
- Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
- Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
When requesting a correction, please mention this item's handle: RePEc:fip:fedfpr:y:2006:x:1. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Noah Pollaczek)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.