Work, Rest, and Search: Unemployment, Turnover, and the Cycle
This paper presents a model that generates procyclical search, procyclical labor productivity, and countercyclical unemployment broadly consistent with the actual behavior of these time series. Concretely, the model introduces an aggregate shock into the sectoral demand-shift model of the type analyzed by Robert Lucas and Edward Prescott. If aggregate shocks operate multiplicatively and are autocorrelated, the payoff to unemployed search can be procyclical to an extent large enough to offset the productive losses associated with search that also are procyclical. Copyright 1987 by University of Chicago Press.
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