Working Paper: CEPR ID: DP16077
Authors: Lars Ljungqvist; Thomas J. Sargent
Abstract: The fundamental surplus isolates parameters that determine how sensitively unemployment respond to productivity shocks in the matching models of Christiano, Eichenbaum and Trabandt (2016 and forthcoming) under either Nash bargaining or alternating-offer bargaining. Those models thus join a collection of models in which diverse forces are intermediated through the fundamental surplus.
Keywords: matching models; alternating offer bargaining; fundamental surplus; DSGE; unemployment; business cycle
JEL Codes: E24; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| value of leisure (D46) | unemployment responsiveness (J64) |
| firm's cost of delay in bargaining (D21) | unemployment responsiveness (J64) |
| fixed matching cost (D43) | unemployment responsiveness (J64) |
| inverse of fundamental surplus fraction (D46) | elasticity of market tightness (R31) |
| fundamental surplus fraction (E25) | unemployment responsiveness (J64) |
| small fundamental surplus fraction (E25) | high elasticity of market tightness (R31) |
| differences in job destruction probabilities (J63) | identification of critical parameters (C52) |