Turbulence and unemployment in matching models

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• dc.contributor.author Baley, Isaacca
• dc.contributor.author Ljungqvist, Larsca
• dc.contributor.author Sargent, Thomas J.ca
• dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2018-02-14T15:30:08Z
• dc.date.available 2018-02-14T15:30:08Z
• dc.date.issued 2018-01-31
• dc.date.modified 2018-02-14T15:29:39Z
• dc.description.abstract Ljungqvist and Sargent (1998, 2008) show that worse skill transition probabilities for workers who suffer involuntary layoffs (i.e., increases in turbulence) generate higher unemployment in a welfare state. den Haan, Haefke and Ramey (2005) challenge this finding by showing that if higher turbulence means that voluntary quits are also exposed to even a tiny risk of skill loss, then higher turbulence leads to lower unemployment within their matching model. We show (1) that there is no such brittleness of the positive turbulence-unemployment relationship in the matching model of Ljungqvist and Sargent (2007) even if we add such quit turbulence , and (2) that if den Haan et al. had calibrated their productivity distribution to fit observed unemployment patterns that they miss, then they too would have found a positive turbulence-unemployment relationship in their model. Thus, we trace den Haan et al. s finding to their assuming a narrower productivity distribution than Ljungqvist and Sargent had. Because den Haan et al. assume a distribution with such narrow support that it implies small returns to reallocating labor, even a small mobility cost shuts down voluntary separations. But that means that the imposition of a small layoff cost in tranquil times has counterfactually large unemployment suppression effects. When the parameterization is adjusted to fit historical observations on unemployment and layoff costs, a positive relationship between turbulence and unemployment reemerges.
• dc.format.mimetype application/pdfca
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1598
• dc.identifier.citation
• dc.identifier.uri http://hdl.handle.net/10230/33901
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1598
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword matching model
• dc.subject.keyword skills
• dc.subject.keyword turbulence
• dc.subject.keyword unemployment
• dc.subject.keyword layoffs
• dc.subject.keyword quits
• dc.subject.keyword layoff costs.
• dc.subject.keyword Macroeconomics and International Economics
• dc.title Turbulence and unemployment in matching modelsca
• dc.title.alternative
• dc.type info:eu-repo/semantics/workingPaper