Uncertainty-driven labor market fluctuations

Michael Pries ()

Journal of Economic Dynamics and Control, 2016, vol. 73, issue C, 181-199

Abstract: This paper explores uncertainty shocks as a driving force in a search and matching model of the labor market. Uncertainty takes the form of a noisy component in a firm׳s initial signal about job productivity. Greater uncertainty dampens job creation by increasing the risk of making the costly mistake of investing in jobs that will turn out to be unprofitable. Thus, uncertainty shocks can cause labor market downturns: lower vacancy rates, lower job-finding rates, and higher unemployment. Numerical simulations examine the level of volatility and the cross-correlations and autocorrelations of key U.S. labor market indicators that result from fluctuations driven by changes in uncertainty.

Keywords: Uncertainty shocks; Unemployment; Search and matching models (search for similar items in EconPapers)
JEL-codes: E24 E32 J63 J64 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:73:y:2016:i:c:p:181-199

DOI: 10.1016/j.jedc.2016.09.003

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