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Equilibrium Unemployment

  • Joao Gomes
  • Jeremy Greenwood
  • Sergio Rebelo

A search-theoretic general equilibrium model of frictional unemployment is shown to be consistent with some of the key regularities of unemployment over the business cycle. In the model the return to a job moves stochastically. Agents can choose either to quit and search for a better job, or continue working. Search generates job offers that agents can accept or reject. Two distinguishing features of current work relative to the existing business cycle literature on labor market fluctuations are: (i) the decision to accept or reject jobs is modeled explicitly, and (ii) there is imperfect insurance against unemployment.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 5922.

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Date of creation: Feb 1997
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Publication status: published as Gomes, Joao, Jeremy Greenwood and Sergio Rebelo. "Equilibrium Unemployment," Journal of Monetary Economics, 2001, v48(1,Aug), 109-152.
Handle: RePEc:nbr:nberwo:5922
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