Search and Rest Unemployment
This paper extends Lucas and Prescott's (1974) search model to develop a notion of rest unemployment. The economy consists of a continuum of labor markets, each of which produces a heterogeneous good. There is a constant returns to scale production technology in each labor market, but labor productivity is continually hit by idiosyncratic shocks, inducing the costly reallocation of workers across labor markets. Under some conditions, some workers may be rest-unemployed, waiting for local labor market conditions to improve, rather than engaged in time consuming search. The model has distinct notions of unemployment (moving to a new labor market or waiting for labor market conditions to improve) and inactivity (enjoying leisure while disconnected from the labor market). We obtain closed-form expressions for key aggregate variables and use them to evaluate the model. Quantitatively, we find that in the U.S. economy many more people may be in rest unemployment than in search unemployment.
|Date of creation:||Feb 2008|
|Date of revision:|
|Publication status:||published as Fernando Alvarez & Robert Shimer, 2011. "Search and Rest Unemployment," Econometrica, Econometric Society, vol. 79(1), pages 75-122, 01.|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- David Weinstein & Christian Broda, 2004.
"Globalization and the Gains from Variety,"
2004 Meeting Papers
530, Society for Economic Dynamics.
- Christian Broda & David Weinstein, 2004. "Globalization and the gains from variety," Staff Reports 180, Federal Reserve Bank of New York.
- David Weinstein & Christian Broda, 2004. "Globalization and the Gains from Variety," Econometric Society 2004 North American Summer Meetings 508, Econometric Society.
- Christian Broda & David E. Weinstein, 2004. "Globalization and the Gains from Variety," NBER Working Papers 10314, National Bureau of Economic Research, Inc.
- David E. Weinstein & Christian Broda, 2004. "Globalization And The Gains From Variety," Econometric Society 2004 Latin American Meetings 327, Econometric Society.
- Clifford Ball & Antonio Roma, 1998. "Detecting mean reversion within reflecting barriers: application to the European Exchange Rate Mechanism," Applied Mathematical Finance, Taylor & Francis Journals, vol. 5(1), pages 1-15.
- Starr-McCluer, Martha, 1993. "Cyclical fluctuations and sectoral reallocation : A reexamination," Journal of Monetary Economics, Elsevier, vol. 31(3), pages 417-425, June.
- Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
- R. Jason Faberman, 2003. "Job Flows and Establishment Characteristics: Variations Across U.S. Metropolitan Areas," William Davidson Institute Working Papers Series 2003-609, William Davidson Institute at the University of Michigan.
- Loungani, Prakash & Rogerson, Richard, 1989. "Cyclical fluctuations and sectoral reallocation : Evidence from the PSID," Journal of Monetary Economics, Elsevier, vol. 23(2), pages 259-273, March.
- Lawrence F. Katz & Bruce D. Meyer, 1988.
"Unemployment Insurance, Recall Expectations, And Unemployment Outcomes,"
NBER Working Papers
2594, National Bureau of Economic Research, Inc.
- Katz, Lawrence F & Meyer, Bruce D, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, MIT Press, vol. 105(4), pages 973-1002, November.
- Atkenson, Andrew & Khan, Aubhik & Ohanian, Lee, 1996. "Are data on industry evolution and gross job turnover relevant for macroeconomics?," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 44(1), pages 215-239, June.
- Ian P. King, 1990. "A Natural Rate Model of Frictional and Long-term Unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 523-45, August.
- Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
- Fernando Alvarez & Marcelo Veracierto, 1999.
"Labor market policies in an equilibrium search model,"
Working Paper Series
WP-99-10, Federal Reserve Bank of Chicago.
- Fernando Alvarez & Marcelo Veracierto, 2000. "Labor-Market Policies in an Equilibrium Search Model," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 265-316 National Bureau of Economic Research, Inc.
- Alvarez, Fernando & Veracierto, Marcelo, 2001. "Severance payments in an economy with frictions," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 477-498, June.
- Jovanovic, Boyan, 1987. "Work, Rest, and Search: Unemployment, Turnover, and the Cycle," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 131-48, April.
- Scott Schuh & Robert K. Triest, 2000. "Role of firms in job creation and destruction in U.S. manufacturing," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 29-44.
- Chinhui Juhn & Kevin M. Murphy & Robert H. Topel, 1991. "Why Has the Natural Rate of Unemployment Increased over Time?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(2), pages 75-142.
- Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006.
"The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links,"
Journal of Economic Perspectives,
American Economic Association, vol. 20(3), pages 3-26, Summer.
- Steven J. Davis & R. Jason Faberman & John Haltiwanger, 2006. "The Flow Approach to Labor Markets: New Data Sources and Micro-Macro Links," NBER Working Papers 12167, National Bureau of Economic Research, Inc.
- Gueorgui Kambourov & Iourii Manovskii, 2009.
"Occupational Specificity Of Human Capital,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, 02.
- Abel, Andrew B & Eberly, Janice C, 1996.
"Optimal Investment with Costly Reversibility,"
Review of Economic Studies,
Wiley Blackwell, vol. 63(4), pages 581-93, October.
- Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2011.
"Frictional Wage Dispersion in Search Models: A Quantitative Assessment,"
American Economic Review,
American Economic Association, vol. 101(7), pages 2873-98, December.
- Andreas Hornstein & Per Krusell & Giovanni L. Violante, 2007. "Frictional Wage Dispersion in Search Models: A Quantitative Assessment," NBER Working Papers 13674, National Bureau of Economic Research, Inc.
- Giovanni L. Violante & Per Krusell & Andreas Hornstein, 2006. "Frictional wage dispersion in search models: a quantitative assessment," Working Paper 06-07, Federal Reserve Bank of Richmond.
- Gouge, Randall & King, Ian, 1997. "A Competitive Theory of Employment Dynamics," Review of Economic Studies, Wiley Blackwell, vol. 64(1), pages 1-22, January.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:13772. 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: ()
If references are entirely missing, you can add them using this form.