Economics at your fingertips  

Evaluating Business Cycle Models with Labor Market Search

Robert Hussey

No 134, Computing in Economics and Finance 2001 from Society for Computational Economics

Abstract: Incorporating labor market search in general equilibrium models has been shown to generate realistic dynamics in employment, job creation, and job destruction and to increase the magnitude and persistence of the impact of productivity shocks on output. This paper studies the extent to which the empirical successes of those models are dependent upon specifications of the matching technology that can exaggerate the level of unemployment, making possible large employment flows in response to business cycle shocks. Even with a more strict definition of unemployment and a less constrained flow of workers into new employment, models with labor market search are still found to generate larger and more persistent propagation of productivity shocks than do traditional real business cycle models. However, the respecification of the job turnover process reduces the size of those effects. Policy experiments find that subsidizing job creation can lead to small reductions in output's response to a negative productivity shock, but it reduces steady state output and consumption and increases unemployment and the volatility of output. Taxing job destruction the opposite effects.

Keywords: search; general equilibrium; business cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2001-04-01
References: Add references at CitEc
Citations: Track citations by RSS feed

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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:

Access Statistics for this paper

More papers in Computing in Economics and Finance 2001 from Society for Computational Economics Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().

Page updated 2022-08-09
Handle: RePEc:sce:scecf1:134