Show simple item record Schaal, Edouard 2019-10-29T16:03:09Z 2019-10-29T16:03:09Z 2017-05
dc.description.abstract This paper studies the impact of time-varying idiosyncratic risk at the establishment level on aggregate unemployment fluctuations and on the labor market over the period 1972-2009. I build a tractable search-and-matching model of the labor market with firm dynamics and heterogeneity in productivity and sizes, in which I introduce time-varying idiosyncratic volatility. The model features directed search and allows for endogenous separations, entry and exit of establishments, and job-to-job transitions. I show, first, that the model can replicate salient features of the behavior of firms at the microeconomic level. Second, I find that the introduction of time-varying idiosyncratic volatility improves the fit of search-and-matching models for a range of business cycle moments. In a series of counterfactual experiments, I then show that time-varying idiosyncratic risk is important to account for the magnitude of fluctuations in aggregate unemployment for past US recessions, including in particular the recessions of 1990-1991 and 2001. Though the model can account for about 40% of the total increase in unemployment for the 2007-2009 recession, uncertainty alone does not seem sufficient to explain the magnitude and persistence of unemployment observed during that period.
dc.format.mimetype application/pdf
dc.language eng
dc.language.iso eng
dc.relation.ispartofseries Working Papers CREI (Centre de Recerca en Economia Internacional);
dc.title Uncertainty and unemployment
dc.type info:eu-repo/semantics/workingPaper
dc.rights.accessRights info:eu-repo/semantics/openAccess

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