Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets
Maximiliano Dvorkin ()
No 1229, 2013 Meeting Papers from Society for Economic Dynamics
This paper makes three contributions. First, on the technical side, I adapt and extend numerical techniques to solve a Lucas & Prescott (1974) type of model with a sufficiently large number of islands and aggregate uncertainty. The main difficulty in these models is that the whole distribution of wages and economic conditions over islands is part of the state variables in the worker's decision problem, and with aggregate uncertainty this distribution is not time invariant. Second, I analyze the cyclical properties of island models. Despite the original paper was published almost 40 years ago, little is known about the business cycle properties of this model. Last, I use the model to quantify the importance of sectoral shocks in generating cyclical fluctuations in the labor market and in particular, whether the dynamics of the labor market in the Great Recession are a result of a adverse sectoral shocks or a weak aggregate demand.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:1229
Access Statistics for this paper
More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().