Cookies?
Library Header Image
LSE Research Online LSE Library Services

The dark corners of the labor market

Sterk, Vincent (2016) The dark corners of the labor market. Staff Working Paper Series (CFM-DP2016-03). Centre For Macroeconomics, London, UK.

[img]
Preview
Text - Published Version
Download (1MB) | Preview

Abstract

Standard models predict that episodes of high unemployment are followed by recoveries. This paper shows, by contrast, that a large shock may set the economy on a path towards very high unemployment, with no recovery in sight. First, I estimate a reduced-form model of áows in the U.S. labor market, allowing for the possibility of multiple steady states. Next, I estimate a non-linear search and matching model, in which multiplicity of steady states may arise due to skill losses upon unemployment, following Pissarides (1992). In both cases, estimates imply a stable steady state with around 5 percent unemployment and an unstable one with around 10 percent unemployment. The search and matching model can explain observed job Önding rates remarkably well, due to its strong endogenous persistence mechanism.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Home.aspx
Additional Information: © 2016 The Authors
Divisions: Centre for Macroeconomics
Subjects: H Social Sciences > HB Economic Theory
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J23 - Employment Determination; Job Creation; Demand for Labor; Self-Employment
Date Deposited: 13 Dec 2017 10:51
Last Modified: 11 Dec 2024 19:23
URI: http://eprints.lse.ac.uk/id/eprint/86244

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics