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On the cyclical behavior of employment, unemployment and labor force participation

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  • Marcelo Veracierto

Abstract

In this paper I evaluate to what extent a real business cycle (RBC) model that incorporates search and leisure decisions can simultaneously account for the observed behavior of employment, unemployment and out-of-the-labor-force. This contrasts with the previous RBC literature, which analyzed employment or hours fluctuations by either lumping together unemployment and out-of-the-labor-force into a single non-employment state or assuming a fixed labor force participation. Once the three employment states are explicitly introduced I find that the RBC model generates highly counterfactual labor market dynamics.

Suggested Citation

  • Marcelo Veracierto, 2002. "On the cyclical behavior of employment, unemployment and labor force participation," Working Paper Series WP-02-12, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-02-12
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    Keywords

    Employment (Economic theory); Labor market; Labor supply; Unemployment;
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