Labor-Market Search and International Business Cycles

Jean-Olivier Hairault

Review of Economic Dynamics, 2002, vol. 5, issue 3, 535-558

Abstract: The objective of this paper is to explain the observed international fluctuations by modifying the traditional modelling of the labor market in the two-country real business cycles model. Our intuition is that labor-market search can be useful to understand the propagation of international fluctuations. Changes in the expected returns to search induce responses in search and recruiting activities, the effects of which are propagated through time via changes in the stock of employment. Given that the technology shock spills over to the other country, domestic and foreign firms start searching at the same time in anticipation. Employment then increases simultaneously and displays a hump-shaped profile in the two countries. This partially curtails the capital outflow from the country which does not benefit from the shock. Introducing in a search framework a non-separability between consumption and leisure in the utility function allows both to solve the consumption puzzle and to complete the explanation of the international comovement puzzle. (Copyright: Elsevier)

Keywords: international business cycles; search; wage bargaining (search for similar items in EconPapers)
JEL-codes: E32 F41 J40 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
http://dx.doi.org/10.1006/redy.2001.0154 Full text (application/pdf)
Access to full texts is restricted to ScienceDirect subscribers and ScienceDirect institutional members. See http://www.sciencedirect.com/ for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:v:5:y:2002:i:3:p:535-558

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1006/redy.2001.0154

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().