Business cycles, unemployment insurance and the calibration of matching models

Costain, James S.; Reiter, Michael

Business cycles, unemployment insurance and the calibration of matching models

Llicència

Citació

Costain, J, Reiter, M. Business cycles, unemployment insurance and the calibration of matching models. 2003. handle: http://hdl.handle.net/10230/789

Aquesta citació s'ha generat automàticament.

Resum

This paper theoretically and empirically documents a puzzle that arises when an RBC economy with a job matching function is used to model unemployment. The standard model can generate sufficiently large cyclical fluctuations in unemployment, or a sufficiently small response of unemployment to labor market policies, but it cannot do both. Variable search and separation, finite UI benefit duration, efficiency wages, and capital all fail to resolve this puzzle. However, either sticky wages or match-specific productivity shocks can improve the model's performance by making the firm's flow of surplus more procyclical, which makes hiring more procyclical too.