Aggregate unemployment in Krusell and Smith’s economy: a note
Using data on workers’ flows into and out of employment, unemployment, and not-in-the-labor-force, I construct transition probabilities between “employment” and “unemployment” that can be used in the calibration of economies such as Krusell and Smith’s (1998). I show that calibration in Krusell and Smith has some counterfactual features. Yet the gains from adopting alternative calibrations in terms of matching the data are not very large, unless one assumes that the duration of unemployment spells is well above what is usually assumed in the literature.
|Date of creation:||2005|
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- 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 1-19.
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- Per Krusell & Anthony A. Smith, Jr., "undated". "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers 1997-37, Carnegie Mellon University, Tepper School of Business.
- Krusell, P & Smith Jr, A-A, 1995. "Income and Wealth Heterogeneity in the Macroeconomic," RCER Working Papers 399, University of Rochester - Center for Economic Research (RCER).
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