Credit constraints and persistence of unemployment

Nicolas Dromel, Elie Kolakez () and Etienne Lehmann ()
Additional contact information
Elie Kolakez: ERMES - TEPP, Université Paris 2 Panthéon-Assas

Documents de travail du Centre d'Economie de la Sorbonne from Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne

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 19 OECD countries. Our results suggest that credit market imperfections would significantly increase the persistence of unemployment

Keywords: Credit markets; labor markets; unemployment; credit constraints; search frictions (search for similar items in EconPapers)
JEL-codes: E24 E44 J08 J64 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2009-05
New Economics Papers: this item is included in nep-dge, nep-ent, nep-lab and nep-mac
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Citations: View citations in EconPapers (5)

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ftp://mse.univ-paris1.fr/pub/mse/CES2009/09032.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 the Persistence of Unemployment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:mse:cesdoc:09032

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