Do Matching Frictions Explain Unemployment? Not in Bad Times

Pascal Michaillat

CEP Discussion Papers from Centre for Economic Performance, LSE

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.

Keywords: Unemployment; matching frictions; job rationing (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2010-11
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (56)

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Journal Article: Do Matching Frictions Explain Unemployment? Not in Bad Times (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cep:cepdps:dp1024

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