Unemployment and Endogenous Reallocation over the Business Cycle

Carlos Carrillo-Tudela and Ludo Visscher ()
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Ludo Visscher: https://sites.google.com/site/ludosresearch/
Authors registered in the RePEc Author Service: Ludo Visschers

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: This paper studies unemployed workers' decisions to change occupations, and their impact on fluctuations in aggregate unemployment and its underlying duration distribution. We develop an analytically and computationally tractable stochastic equilibrium model with heterogeneous labor markets. In this model three different types of unemployment arise: search, rest and reallocation unemployment. We document new evidence on unemployed workers' gross occupational mobility and use it to calibrate the model. We show that rest unemployment is the main driver of unemployment fluctuations over the business cycle and causes cyclical unemployment to be highly volatile. The resulting unemployment duration distribution generated by the model responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, rest unemployment also makes our model simultaneously consistent with procyclical occupational mobility of the unemployed, countercyclical job separations into unemployment and a negatively-sloped Beveridge curve.

Keywords: unemployment; business cycle; rest; search; occupational mobility (search for similar items in EconPapers)
JEL-codes: E24 E30 J62 J63 J64 (search for similar items in EconPapers)
Pages: 83
Date: 2014-05
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
http://www.econ.ed.ac.uk/papers/id241_esedps.pdf

Related works:
Journal Article: Unemployment and Endogenous Reallocation Over the Business Cycle (2023)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2023)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2021)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2020)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2020)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2020)
Working Paper: Unemployment and endogenous reallocation over the business cycle (2014)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2014)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2013)
Working Paper: Unemployment and endogenous reallocation over the business cycle (2013)
Working Paper: Unemployment and endogenous reallocation over the business cycle (2013)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2013)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2012)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2012)
Working Paper: Unemployment and Endogenous Reallocation over the Business Cycle (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:241

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