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Capital Utilization and Search Unemployment in Dynamic General Equilibrium

Author

Listed:
  • Ian King

    () (School of Economics, The University of Queensland)

  • Frank Stähler

    () (School of Business and Economics, University of Tübingen)

Abstract

We present a dynamic general equilibrium model in which both unemployment and capital utilization are determined endogenously in an environment with directed search frictions. The model allows for proportions of both labor and capital to be idle in equilibrium, where the degree of capital utilization determines its depreciation. We show that, under certain conditions, multiple steady state equilibria exist. In stable equilibria, both unemployment and capital utilization rates decline as productivity increases.

Suggested Citation

  • Ian King & Frank Stähler, 2018. "Capital Utilization and Search Unemployment in Dynamic General Equilibrium," Discussion Papers Series 598, School of Economics, University of Queensland, Australia.
    • Handle: RePEc:qld:uq2004:598
    as

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    File URL: http://www.uq.edu.au/economics/abstract/598.pdf
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    References listed on IDEAS

    as
    1. Matthew Doyle & Jacob Wong, 2013. "Wage Posting Without Full Commitment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(2), pages 231-252, April.
    2. Benoît Julien & John Kennes & Ian King & Sephorah Mangin, 2009. "Directed search, unemployment and public policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 956-983, August.
    3. Basov, Suren & King, Ian & Uren, Lawrence, 2014. "Worker heterogeneity, the job-finding rate, and technical change," European Economic Review, Elsevier, vol. 70(C), pages 159-177.
    4. Derek Stacey, 2019. "Posted Prices, Search and Bargaining," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 33, pages 85-104, July.
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    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Capital Utilization and Search Unemployment in Dynamic General Equilibrium
      by Christian Zimmermann in NEP-DGE blog on 2018-10-30 19:54:10

    More about this item

    Keywords

    Search unemployment; capital utilization; multiple equilibria;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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