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Aggregate unemployment in Krusell and Smith’s economy: a note

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Abstract

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.

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  • Marco Del Negro, 2005. "Aggregate unemployment in Krusell and Smith’s economy: a note," FRB Atlanta Working Paper 2005-06, Federal Reserve Bank of Atlanta.
    • Handle: RePEc:fip:fedawp:2005-06
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    1. Cole, Harold L & Rogerson, Richard, 1999. "Can the Mortensen-Pissarides Matching Model Match the Business-Cycle Facts?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 933-959, November.
    2. Per Krusell & Anthony A. Smith & Jr., 1998. "Income and Wealth Heterogeneity in the Macroeconomy," Journal of Political Economy, University of Chicago Press, vol. 106(5), pages 867-896, October.
    3. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
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    5. Hoyt Bleakley & Ann E. Ferris & Jeffrey C. Fuhrer, 1999. "New data on worker flows during business cycles," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 49-76.
    6. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
    7. Robert Shimer, 2003. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies: Evidence and Theory," NBER Working Papers 9536, National Bureau of Economic Research, Inc.
    8. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 254-283, June.
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