Working Paper: NBER ID: w15251
Authors: Per Krusell; Toshihiko Mukoyama; Richard Rogerson; Aysegul Sahin
Abstract: We develop a simple model featuring search frictions and a nondegenerate labor supply decision along the extensive margin. The model is a standard version of the neoclassical growth model with indivisible labor with idiosyncratic shocks and frictions characterized by employment loss and employment opportunity arrival shocks. We argue that it is able to account for the key features of observed labor market flows for reasonable parameter values. Persistent idiosyncratic productivity shocks play a key role in allowing the model to match the persistence of the employment and out of the labor force states found in individual labor market histories.
Keywords: No keywords provided
JEL Codes: E24; J22; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| persistent idiosyncratic productivity shocks (O49) | labor market states (J48) |
| model parameters (C51) | labor market dynamics (J29) |
| idiosyncratic shocks (D89) | transitions between employment, unemployment, and non-participation (J63) |
| model's assumptions (C51) | observed labor market behavior (J29) |
| transitions from employment to unemployment (e to u) (J60) | labor market flows (J69) |
| transitions from unemployment to employment (u to e) (J60) | labor market flows (J69) |
| transitions from non-participation to employment (n to e) (J62) | labor market flows (J69) |