Structural and Cyclical Forces in the Labor Market During the Great Recession: Cross-Country Evidence

Luca Sala (luca.sala@unibocconi.it), Ulf Söderström (ulf.soderstrom@riksbank.se) and Antonella Trigari (antonella.trigari@unibocconi.it)

No 264, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: We use an estimated monetary business cycle model with search and matching frictions in the labor market and nominal price and wage rigidities to study four countries (the U.S., the U.K., Sweden, and Germany) during the financial crisis and the Great Recession. We estimate the model over the period prior to the financial crisis and use the model to interpret movements in GDP, unemployment, vacancies, and wages in the period from 2007 until 2011. We show that contractionary financial factors and reduced efficiency in labor market matching were largely responsible for the experience in the U.S. Financial factors were also important in the U.K., but less so in Sweden and Germany. Reduced matching efficiency was considerably less important in the U.K. and Sweden than in the U.S., but matching efficiency improved in Germany, helping to keep unemployment low. A counterfactual experiment suggests that unemployment in Germany would have been substantially higher if the German labor market had been more similar to that in the U.S.

Keywords: Business cycles; financial crisis; labor market matching; Beveridge curve (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2012-10-01
New Economics Papers: this item is included in nep-eec, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence (2013)
Chapter: Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence (2012)
Working Paper: Structural and Cyclical Forces in the Labor Market During the Great Recession: Cross-Country Evidence (2012)
Working Paper: Structural and Cyclical Forces in the Labor Market During the Great Recession: Cross-Country Evidence (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0264

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