A congestion theory of unemployment fluctuations
By: Mercan, Yusuf, Schoefer, Benjamin and Sedláček, Petr
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Material type: 
BookPublisher: American Economic Journal: Macroeconomics Description: 16(1), Jan, 2024: p.238-285.
In:
American Economic Journal: MacroeconomicsSummary: We propose a theory of unemployment fluctuations in which new hires and incumbent workers are imperfect substitutes. Hence, attempts to hire away the unemployed during recessions diminish the marginal product of new hires, discouraging job creation. This single feature achieves a tenfold increase in the volatility of hiring in an otherwise standard search model, produces a realistic Beveridge curve despite countercyclical separations, and explains 30–40 percent of US unemployment fluctuations. Additionally, it explains the excess procyclicality of new hires' wages, the cyclical labor wedge, countercyclical earnings losses from job displacement, and the limited steady-state effects of unemployment insurance. – Reproduced
https://www.aeaweb.org/articles?id=10.1257/mac.20210171
| Item type | Current location | Call number | Vol info | Status | Date due | Barcode |
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Articles
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Indian Institute of Public Administration | 16(1), Jan, 2024: p.238-285 | Available | AR131321 |
We propose a theory of unemployment fluctuations in which new hires and incumbent workers are imperfect substitutes. Hence, attempts to hire away the unemployed during recessions diminish the marginal product of new hires, discouraging job creation. This single feature achieves a tenfold increase in the volatility of hiring in an otherwise standard search model, produces a realistic Beveridge curve despite countercyclical separations, and explains 30–40 percent of US unemployment fluctuations. Additionally, it explains the excess procyclicality of new hires' wages, the cyclical labor wedge, countercyclical earnings losses from job displacement, and the limited steady-state effects of unemployment insurance. – Reproduced
https://www.aeaweb.org/articles?id=10.1257/mac.20210171
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