Pissarides, Christopher (2009) The unemployment volatility puzzle: is wage stickiness the answer? Econometrica, 77 (5). pp. 1339-1369. ISSN 1468-0262
Abstract
I discuss the failure of the canonical search and matching model to match the cyclical volatility in the job finding rate. I show that job creation in the model is influenced by wages in new matches. I summarize microeconometric evidence and find that wages in new matches are volatile and consistent with the model's key predictions. Therefore, explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages. I discuss a modification of the model, based on fixed matching costs, that can increase cyclical unemployment volatility and is consistent with wage flexibility in new matches.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.wiley.com/bw/journal.asp?ref=0012-9682 |
| Additional Information: | © 2009 The Econometric Society |
| Library of Congress subject classification: | H Social Sciences > HD Industries. Land use. Labor |
| Sets: | Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP) Departments > Economics |
| Identification Number: | UT ISI:000271236300001 |
| Date Deposited: | 11 Jan 2010 11:05 |
| URL: | http://eprints.lse.ac.uk/26622/ |
Actions (login required)
 |
Record administration - authorised staff only |
