The Asymmetric Cyclical Behavior of the U.S. Labor Market

Domenico Ferraro

No 1104, 2014 Meeting Papers from Society for Economic Dynamics

Abstract: Cyclical fluctuations in the U.S. labor market and output exhibit a significant asymmetry. In this paper, I develop a search-and-matching model with endogenous job destruction and permanently heterogeneous workers (in skill/productivity) that accounts for this asymmetry while also generating (i) realistic volatility in unemployment and job-finding rates and (ii) preserving a downward-sloping Beveridge curve. The model delivers stark predictions for the time series of skill-specific unemployment rates that hold in CPS micro data once I sort workers by age and education. A general implication of the analysis is that the responsiveness of unemployment to stimulus policies increases substantially during recessions.

Date: 2014
New Economics Papers: this item is included in nep-dge
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Journal Article: The Asymmetric Cyclical Behavior of the U.S. Labor Market (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed014:1104

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