Credit Constraints and the Persistence of Unemployment

Nicolas Dromel, Elie Kolakez () and Etienne Lehmann ()
Additional contact information
Elie Kolakez: University of Paris 2 - ERMES

No 4501, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 20 OECD countries. Our results suggest that credit market imperfections significantly increase the persistence of unemployment.

Keywords: credit constraints; unemployment; labor markets; credit markets; search frictions (search for similar items in EconPapers)
JEL-codes: E24 E44 J08 J64 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2009-10
New Economics Papers: this item is included in nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Published - published in: Labour Economics, 2010, 17 (5), 823-834

Downloads: (external link)
https://docs.iza.org/dp4501.pdf (application/pdf)

Related works:
Journal Article: Credit constraints and the persistence of unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2009)
Working Paper: Credit Constraints and the Persistence of Unemployment (2009)
Working Paper: Credit constraints and persistence of unemployment (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp4501

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().