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The labor wedge as a matching friction

Anton Cheremukhin and Paulina Restrepo-Echavarria

No 1004, Working Papers from Federal Reserve Bank of Dallas

Abstract: The labor wedge accounts for a large fraction of business cycle fluctuations. This paper uses a search and matching model to decompose the labor wedge into three classes of labor market frictions and evaluate their role. We find that frictions to job destruction and bargaining commonly considered in the search literature are not helpful in explaining the labor wedge. We also identify an asymmetric effect of separation, bargaining and matching frictions on unemployment, as well as a potential solution to Shimer's puzzle.

Keywords: Business cycles - Econometric models; Labor supply; Unemployment; Labor turnover (search for similar items in EconPapers)
Pages: 46 pages
Date: 2010
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Note: Published as: Cheremukhin, Anton A. and Paulina Restrepo-Echabarria (2014), "The Labor Wedge as a Matching Friction," European Economic Review 68: 71-92.
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Citations: View citations in EconPapers (27)

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Journal Article: The labor wedge as a matching friction (2014) Downloads
Working Paper: The Labor Wedge as a Matching Friction (2008) Downloads
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