Unemployment Crises

Nicolas Petrosky-Nadeau and Lu Zhang (zhanglu@fisher.osu.edu)

Working Paper Series from Ohio State University, Charles A. Dice Center for Research in Financial Economics

Abstract: A search and matching model, when calibrated to the mean and volatility of unemployment in the postwar sample, can potentially explain the unemployment crisis in the Great Depression. The limited responses of wages from credible bargaining to labor market conditions, along with the congestion externality from matching frictions, cause the unemployment rate to rise sharply in recessions but decline gradually in booms. The frequency, severity, and persistence of unemployment crises in the model are quantitatively consistent with U.S. historical time series. The welfare gain from eliminating business cycle fluctuations is large.

JEL-codes: E24 E32 J63 J64 (search for similar items in EconPapers)
Date: 2013-12
New Economics Papers: this item is included in nep-dge and nep-mac
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Unemployment Crises (2013)
Working Paper: Unemployment Crises
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Persistent link: https://EconPapers.repec.org/RePEc:ecl:ohidic:2014-11

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