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THE UNEMPLOYMENT VOLATILITY PUZZLE: THE ROLE OF THE UNDERGROUND ECONOMY

Gaetano Lisi ()

Journal of Applied Economic Sciences, 2010, vol. 5, issue 2(12)/Summer2010, 59-69

Abstract: Relying on the non-negligible role played by the underground economy in the labour market fluctuations, this paper extends the standard matching model à la Mortensen-Pissarides by introducing an underground sector along with an endogenous sector choice for both entrepreneurs and workers. These modifications improve the quantitative properties of the standard matching model, thus providing a possible explanation for the unemployment volatility puzzle.

Keywords: unemployment and vacancies volatility; productivity and job destruction shocks; underground economy; shadow economy; hidden economy; matching models (search for similar items in EconPapers)
JEL-codes: E26 E32 J23 J24 J63 J64 (search for similar items in EconPapers)
Date: 2010
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Working Paper: The unemployment volatility puzzle: the role of the underground economy (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ush:jaessh:v:5:y:2010:i:2(12)_spring2010:p:101

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