Working Paper: NBER ID: w13872
Authors: Richard Rogerson; Lodewijk P. Visschers; Randall Wright
Abstract: Shimer's calibrated version of the Mortensen-Pissarides model generates unemployment fluctuates much smaller than the data. Hagedorn and Manovskii present an alternative calibration that yields fluctuations consistent with the data, but this has been challenged by Costain and Reiter, who say it generates unrealistically big differences in unemployment from the differences in policy we sees across countries. We argue this concern may be unwarranted, because one cannot assume elasticities relevant for small changes work for large changes. Models with fixed factors in market or household production can generate large effects from small changes and reasonable effects from large changes. This is reminiscent of attempts to improve the labor market in the Kydland-Prescott model, especially ones incorporating household production, like Benhabib, Rogerson and Wright.
Keywords: No keywords provided
JEL Codes: E2; E3; J2; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| productivity shocks (O49) | unemployment fluctuations (J64) |
| Mortensen-Pissarides model calibration by Shimer (E19) | unemployment fluctuations (J64) |
| Hagedorn and Manovskii's calibration (C51) | unemployment fluctuations (J64) |
| small productivity changes (O49) | unemployment effects (J65) |
| large productivity changes (O49) | unemployment responses (J64) |
| elasticity of unemployment with respect to productivity changes (E24) | unemployment fluctuations (J64) |