The Fundamental Surplus
Lars Ljungqvist and
Thomas Sargent ()
American Economic Review, 2017, vol. 107, issue 9, 2630-65
To generate big responses of unemployment to productivity changes, researchers have reconfigured matching models in various ways: by elevating the utility of leisure, by making wages sticky, by assuming alternating-offer wage bargaining, by introducing costly acquisition of credit, by assuming fixed matching costs, or by positing government-mandated unemployment compensation and layoff costs. All of these redesigned matching models increase responses of unemployment to movements in productivity by diminishing the fundamental surplus fraction, an upper bound on the fraction of a job's output that the invisible hand can allocate to vacancy creation. Business cycles and welfare state dynamics of an entire class of reconfigured matching models all operate through this common channel.
JEL-codes: E23 E24 E32 J24 J31 J41 J63 (search for similar items in EconPapers)
Note: DOI: 10.1257/aer.20150233
References: Add references at CitEc
Citations: View citations in EconPapers (10) Track citations by RSS feed
Downloads: (external link)
https://www.aeaweb.org/articles/attachments?retrie ... mMTw2Uo7m5EDNhN7q4vS (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... IOUlcOu6jsvRRr0FkCYP (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... D1PFEc_-o8RN6ZKuMY4q (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:107:y:2017:i:9:p:2630-65
Ordering information: This journal article can be ordered from
Access Statistics for this article
American Economic Review is currently edited by Esther Duflo
More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().