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Do matching frictions explain unemployment?: not in bad times

Michaillat, Pascal (2012) Do matching frictions explain unemployment?: not in bad times. American Economic Review, 102 (4). pp. 1721-1750. ISSN 0002-8282

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Identification Number: 10.1257/aer.102.4.1721

Abstract

This paper models unemployment as the result of matching frictions and job rationing. Job rationing is a shortage of jobs arising naturally in an economic equilibrium from the combination of some wage rigidity and diminishing marginal returns to labor. During recessions, job rationing is acute, driving the rise in unemployment, whereas matching frictions contribute little to unemployment. Intuitively, in recessions jobs are lacking, the labor market is slack, recruiting is easy and inexpensive, so matching frictions do not matter much. In a calibrated model, cyclical fluctuations in the composition of unemployment are quantitatively large.

Item Type: Article
Official URL: http://www.aeaweb.org/
Additional Information: © 2012 American Economic Association
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Sets: Departments > Economics
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 20 Feb 2012 16:18
Last Modified: 02 Jun 2014 09:08
URI: http://eprints.lse.ac.uk/id/eprint/41957

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