Complicated dynamics in a flow model of the labor market

Michael Neugart

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: We develop a worker flow model with a nonlinear and endogenous outflow rate from unemployment. Inconsistent claims on the output lead to changing inflation rates which feedback on job offers through the real money supply. Via simulations one can show that the nonlinear outflow rate causes asymmetric adjustment of unemployment to the ‘equilibrium rate of unemployment’. In addition, and depending on the parameters, the ‘equilibrium rate of unemployment’ may also become locally unstable. Then, there is a downward sloping Phillips curve but no trade-off between unemployment and inflation in the short run, as there is none in the long run.

Date: 2024-06-24
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Published in Journal of Economic Behavior & Organization 2 (2024-06-24)

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https://tuprints.ulb.tu-darmstadt.de/27411
https://doi.org/10.1016/S0167-2681(03)00085-4

Related works:
Journal Article: Complicated dynamics in a flow model of the labor market (2004)
Working Paper: Complicated dynamics in a flow model of the labor market (2004)
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