EconPapers    
Economics at your fingertips  
 

Unemployment Volatility in a Behavioural Search Model

Chris Martin and Bingsong Wang ()
Additional contact information
Chris Martin: University of Bath

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Recent evidence that the opportunity cost of employment is pro cyclical implies that existing models based around search frictions in the labour market cannot match the large volatilities of unemployment and vacancies observed in the data. In this paper, we incorporate insights from behavioural economics into the search frictions framework. The resultant model can match observed volatilities even if the opportunity cost is strongly pro cyclical. The key mechanism in the model is that the pro-cyclicality of the opportunity cost has a limited impact on the reference wage of workers ; this feeds through into a limited volatility of the wage and so to a large unemployment volatility

Keywords: behavioural economics; search frictions; unemployment volatilty (search for similar items in EconPapers)
JEL-codes: E23 E32 J23 J30 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mac and nep-ore
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://warwick.ac.uk/fac/soc/economics/research/w ... /twerp_1179_wang.pdf

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: https://EconPapers.repec.org/RePEc:wrk:warwec:1179

Access Statistics for this paper

More papers in The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Margaret Nash ().

 
Page updated 2019-10-04
Handle: RePEc:wrk:warwec:1179