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Financial shocks and endogenous labor market participation

Lauro Carnicelli

MPRA Paper from University Library of Munich, Germany

Abstract: This article studies the effects of financial shocks on the labor market when participation in the labor force is endogenous. Previous research concerning endogenous participation produced models that generated a counterfactually procyclical unemployment rate and a positively sloped Beveridge curve. This paper shows that collateral constraints alone are not able to produce correlations in line with the data. However, financial shocks, that change the collateral requirements, are responsible for most of the movements on the labor market and generate a countercyclical unemployment and a negatively slopped Beveridge curve.

Keywords: Endogenous participation; Financial shocks (search for similar items in EconPapers)
JEL-codes: E32 E44 J63 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Date: 2018-11
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