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Author: Pascal Michaillat
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 59
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Book Description
This paper develops a model of unemployment fluctuations. The model keeps the architecture of the Barro and Grossman (1971) general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework. On the product and labor markets, both price and tightness adjust to equalize supply and demand. There is one more variable than equilibrium condition on each market, so we consider various price mechanisms to close the model, from completely flexible to completely rigid. With some price rigidity, aggregate demand influences unemployment through a simple mechanism: higher aggregate demand raises the probability that firms find customers, which reduces idle time for firms' employees and thus increases labor demand, which in turn reduces unemployment. We use the comparative-statistics predictions of the model together with empirical measures of quantities and tightnesses to re-examine the origins of labor market fluctuations. We conclude that (1) price and real wage are not fully flexible because product and labor market tightness fluctuate significantly; (2) fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness; and (3) labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with product market tightness.
Author: Pascal Michaillat
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 59
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Book Description
This paper develops a model of unemployment fluctuations. The model keeps the architecture of the Barro and Grossman (1971) general disequilibrium model but replaces the disequilibrium framework on the labor and product markets by a matching framework. On the product and labor markets, both price and tightness adjust to equalize supply and demand. There is one more variable than equilibrium condition on each market, so we consider various price mechanisms to close the model, from completely flexible to completely rigid. With some price rigidity, aggregate demand influences unemployment through a simple mechanism: higher aggregate demand raises the probability that firms find customers, which reduces idle time for firms' employees and thus increases labor demand, which in turn reduces unemployment. We use the comparative-statistics predictions of the model together with empirical measures of quantities and tightnesses to re-examine the origins of labor market fluctuations. We conclude that (1) price and real wage are not fully flexible because product and labor market tightness fluctuate significantly; (2) fluctuations are mostly caused by labor demand and not labor supply shocks because employment is positively correlated with labor market tightness; and (3) labor demand shocks mostly reflect aggregate demand and not technology shocks because output is positively correlated with product market tightness.
Author: Eleanor G. Gilpatrick
Publisher: Johns Hopkins University Press
ISBN:
Category : Business & Economics
Languages : en
Pages : 264
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Book Description
USA. Scrutiny of the various views on the persistence of high level unemployment in recent years. Analysis of the theoretical categories of structural unemployment and of the inadequate demand for labour force. Examination of changing job requirements, particularly of the skill and education aspects thereof. Economic policy implications.
Author: Pascal Michaillat
Publisher:
ISBN:
Category : Demand (Economic theory)
Languages : en
Pages : 0
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Book Description
We present a static model of aggregate demand and unemployment. The economy has a nonproduced good, a produced good, and labor. Product and labor markets have matching frictions. A general equilibrium is a set of prices, market tightnesses, and quantities such that buyers and sellers optimize given prices and tightnesses, and actual tightnesses equal posted tightnesses. In each frictional market, there is one more variable than equilibrium condition. To close the model, we take all prices as parameters. We obtain the following results: (1) unemployment and unsold production prevail in equilibrium; (2) each market can be slack, efficient, or tight if the price is too high, efficient, or too low; (3) product market tightness and sales are positively correlated under aggregate demand shocks but negatively correlated under aggregate supply shocks; (4) transfers from savers to spenders stimulate aggregate demand, product market tightness, and employment; (5) the government-purchase multiplier is positive when the economy is slack, zero when the economy is efficient, and negative when the economy is tight; (6) with unequal distribution of profits and labor income, a wage increase may stimulate aggregate demand and reduce unemployment.
Author: William Harold Hutt
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 284
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Book Description
Author: Eleanor G. Gilpatrick
Publisher:
ISBN:
Category : Unemployed
Languages : en
Pages :
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Book Description
Author: Régis Barnichon
Publisher:
ISBN:
Category : Labor productivity
Languages : en
Pages : 62
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Book Description
This paper presents new empirical evidence on the cyclical behavior of US unemployment that poses a challenge to standard search and matching models. The correlation between cyclical unemployment and the cyclical component of labor productivity switched sign in the mid 80s: from negative it became positive, while standard search models imply a negative correlation. I argue that the inconsistency arises because search models do not allow output to be demand determined in the short run, and I present a search model with nominal rigidities that can rationalize the empirical findings. In addition, I show that the interaction of hiring frictions and nominal frictions can generate a new propagation mechanism absent in standard new-Keynesian models.
Author: Mr.John C Bluedorn
Publisher: International Monetary Fund
ISBN: 1498315690
Category : Business & Economics
Languages : en
Pages : 22
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Book Description
We explore the long-term impact of economic booms on labor market outcomes using a novel approach based on revisions to professional forecasts over the past 30 years for 34 advanced economies. We find that when employment rises unexpectedly, forecasters typically raise their long-term forecasts of employment by more than one-for-one and also expect a strong rise in labor force participation, suggesting more persistent effects than is traditionally assumed. Economic booms associated with changes in aggregate demand, when inflation is rising and unemployment falling unexpectedly, also come with persistent long-term effects on expected employment and labor force participation, suggesting positive hysteresis. Our forecast evaluation tests indicate that forecasters are, on average, unbiased in their assessment of these positive, persistent effects.
Author: Charles R. Bean
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 48
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Book Description
Author: Olivier J. Blanchard
Publisher:
ISBN:
Category : Gross national product
Languages : en
Pages : 60
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Book Description
We interpret fluctuations in GNP and unemployment as due to two types of disturbances: disturbances that have a permanent effect on output and disturbances that do not. We interpret the first as supply disturbances, the second as demand disturbances. We find that demand disturbances have a hump shaped effect on both output and unemployment; the effect peaks after a year and vanishes after two to five years. Up to a scale factor, the dynamic effect on unemployment of demand disturbances is a mirror image of that on output. The effect of supply disturbances on output increases steadily over time, to reach a peak after two years and a plateau after five years. 'Favorab1e supply disturbances may initially increase unemployment. This is followed by a decline in unemployment, with a slow return over time to its original value. While this dynamic characterization is fairly sharp, the data are not as specific as to the relative contributions of demand and supply disturbances to output fluctuations. We find that the time series of demand-determined output fluctuations has peaks and troughs which coincide with most of the NBER troughs and peaks. But variance decompositions of output at various horizons giving the respective contributions of supply and demand disturbances are not precisely estimated. For instance, at a forecast horizon of four quarters, we find that, under alternative assumptions, the contribution of demand disturbances ranges from 40 to over 95 per cent.
Author: Carl Davidson
Publisher:
ISBN:
Category : Unemployment
Languages : en
Pages : 194
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Book Description
Summarises the following theories of unemployment, which have emerged since the 1960s: search, disequilibrium (i.e. fixed price models), implicit contracts, efficiency wage, and insider/outsider models.
