Aggregation in economies with search frictions

Nikolaos Kokonas and Paulo Santos Monteiro

Journal of Mathematical Economics, 2021, vol. 96, issue C

Abstract: We derive an aggregation result in economies with indivisible labor supply choices and frictional labor markets, obtaining a tractable model of gross worker flows in aggregate labor markets with search frictions. Our result explores the fact that economies with non-convex choice sets and idiosyncratic shocks allow for sunspot equilibria à la Kehoe et al. (2002). We use comparative steady state analysis to demonstrate the applicability of our aggregation result. Our framework reconciles the neoclassical growth model with search frictions with a mildly procyclical participation rate and matches the gross worker flows underpinning those dynamics.

Keywords: Indivisibilities; Sunspots; Search frictions; Gross worker flows (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:mateco:v:96:y:2021:i:c:s0304406821000847

DOI: 10.1016/j.jmateco.2021.102521

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