The Network Composition of Aggregate Unemployment

Robert Axtell, Omar Guerrero and Eduardo López

MPRA Paper from University Library of Munich, Germany

Abstract: We develop a theory of unemployment in which workers search for jobs through a network of firms, the labor flow network (LFN). The lack of an edge between two companies indicates the impossibility of labor flows between them due to high frictions. In equilibrium, firms' hiring behavior correlates through the network, modulating labor flows and generating aggregate unemployment. This theory provides new micro-foundations for the aggregate matching function, the Beveridge curve, wage dispersion, and the employer-size premium. Using employer-employee matched records, we study the effect of the LFN topology through a new concept: `firm-specific unemployment'.

Keywords: Aggregate unemployment; labor flow networks; job search (search for similar items in EconPapers)
JEL-codes: C8 D2 D85 J6 L2 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-cse
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:68962

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