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Labor Market Fluctuations in the Small and in the Large

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  • Richard Rogerson
  • Lodewijk P. Visschers
  • Randall Wright

Abstract

Shimer's calibrated version of the Mortensen-Pissarides model generates unemployment fluctuates much smaller than the data. Hagedorn and Manovskii present an alternative calibration that yields fluctuations consistent with the data, but this has been challenged by Costain and Reiter, who say it generates unrealistically big differences in unemployment from the differences in policy we sees across countries. We argue this concern may be unwarranted, because one cannot assume elasticities relevant for small changes work for large changes. Models with fixed factors in market or household production can generate large effects from small changes and reasonable effects from large changes. This is reminiscent of attempts to improve the labor market in the Kydland-Prescott model, especially ones incorporating household production, like Benhabib, Rogerson and Wright.

Suggested Citation

  • Richard Rogerson & Lodewijk P. Visschers & Randall Wright, 2008. "Labor Market Fluctuations in the Small and in the Large," NBER Working Papers 13872, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13872
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    References listed on IDEAS

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    Cited by:

    1. Petrosky-Nadeau, Nicolas, 2013. "TFP during a credit crunch," Journal of Economic Theory, Elsevier, vol. 148(3), pages 1150-1178.
    2. Aleksander Berentsen & Guido Menzio & Randall Wright, 2011. "Inflation and Unemployment in the Long Run," American Economic Review, American Economic Association, vol. 101(1), pages 371-398, February.
    3. Lkhagvasuren, Damba, 2012. "Big locational unemployment differences despite high labor mobility," Journal of Monetary Economics, Elsevier, vol. 59(8), pages 798-814.
    4. Matteo Cacciatore & Giuseppe Fiori, 2016. "The Macroeconomic Effects of Goods and Labor Marlet Deregulation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 20, pages 1-24, April.
    5. Damba Lkhagvasuren, 2005. "Big Locational Differences in Unemployment Despite High Labor Mobility," Working Papers 12002, Concordia University, Department of Economics, revised Feb 2012.
    6. Damba Lkhagvasuren & Roy Nitulescu, 2013. "Sectoral Mobility and Unemployment with Heterogeneous Moving Costs," Journal of Labor Research, Springer, vol. 34(3), pages 339-358, September.

    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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