Credit Constraints and the Persistence of Unemployment

Nicolas Dromel, Elie Kolakez () and Etienne Lehmann ()
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Elie Kolakez: ERMES - Equipe de recherche sur les marches, l'emploi et la simulation - UP2 - Université Panthéon-Assas - CNRS - Centre National de la Recherche Scientifique

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Abstract: In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 20 OECD countries. Our results suggest that credit market imperfections significantly increase the persistence of unemployment.

Keywords: Credit markets; labour markets; unemployment; credit constraints; search frictions (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (27)

Published in Labour Economics, 2010, 17 (5), pp.823-834. ⟨10.1016/j.labeco.2010.04.005⟩

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Related works:
Journal Article: Credit constraints and the persistence of unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2010)
Working Paper: Credit Constraints and the Persistence of Unemployment (2009)
Working Paper: Credit Constraints and the Persistence of Unemployment (2009)
Working Paper: Credit Constraints and the Persistence of Unemployment (2009)
Working Paper: Credit constraints and persistence of unemployment (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00640674

DOI: 10.1016/j.labeco.2010.04.005

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