EconPapers    
Economics at your fingertips  
 

Endogenous Labor Market Participation and the Business Cycle

Christian Haefke () and Michael Reiter ()

No 2029, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Existing models of equilibrium unemployment with endogenous labor market participation are complex, generate procyclical unemployment rates and cannot match unemployment variability relative to GDP. We embed endogenous participation in a simple, tractable job market matching model, show analytically how variations in the participation rate are driven by the cross-sectional density of home productivity near the participation threshold, and how this density translates into an extensive-margin labor supply elasticity. A calibration of the model to macro data not only matches employment and participation variabilities but also generates strongly countercyclical unemployment rates. With some wage rigidity the model also matches unemployment variations well. Furthermore, the labor supply elasticity implied by our calibration is consistent with microeconometric evidence for the US.

Keywords: matching models; labor market participation; labor supply elasticity; time aggregation (search for similar items in EconPapers)
JEL-codes: E24 E32 J21 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Date: 2006-03
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23) Track citations by RSS feed

Downloads: (external link)
http://ftp.iza.org/dp2029.pdf (application/pdf)

Related works:
Working Paper: Endogenous Labor Market Participation and the Business Cycle (2006) Downloads
Working Paper: Endogenous Labor Market Participation and the Business Cycle (2006)
Working Paper: Endogenous labor market participation and the business cycle (2006) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp2029

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().

 
Page updated 2019-09-16
Handle: RePEc:iza:izadps:dp2029