Publication:
Unemployment and endogenous reallocation over the business cycle

Thumbnail Image
Identifiers
URI: http://hdl.handle.net/10016/18876
ISSN: 2340-5031
UXXI: DT/0000001205
Files
we1410.pdf (1009.07 KB)
Publication date
2014-04-01
Defense date
Authors
Advisors
Tutors
Journal Title
Journal ISSN
Volume Title
Publisher
Impact
Google Scholar
Export
Research Projects
Organizational Units
Journal Issue
Abstract
This paper studies unemployed workers’ decisions to change occupations, and their impact on fluctuations in aggregate unemployment and its underlying duration distribution. We develop an analytically and computationally tractable stochastic equilibrium model with heterogenous labor markets. In this model three different types of unemployment arise: search, rest and reallocation unemployment. We document new evidence on unemployed workers’ gross occupational mobility and use it to calibrate the model. We show that rest unemployment is the main driver of unemployment fluctuations over the business cycle and causes cyclical unemployment to be highly volatile. The resulting unemployment duration distribution generated by the model responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, rest unemployment also makes our model simultaneously consistent with procyclical occupational mobility of the unemployed, countercyclical job separations into unemployment and a negatively-sloped Beveridge curve.
Description
Keywords
Unemployment, Business Cycle, Rest, Search, Occupational Mobility
Bibliographic citation
Collections
DE - Working Papers. Economics. WE