Credit constraints and the persistence of unemployment

Nicolas Dromel, Elie Kolakez and Etienne Lehmann ()

Labour Economics, 2010, vol. 17, issue 5, 823-834

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

Keywords: Credit; markets; Labour; markets; Unemployment; Credit; constraints; Search; frictions (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (30)

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Related works:
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)
Working Paper: Credit constraints and persistence of unemployment (2009)
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