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A Three State Model of Worker Flows in General Equilibrium


Per Krusell


Princeton University - Department of Economics; Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR)

Toshihiko Mukoyama


University of Virginia - Economics; CIREQ

Richard Rogerson


Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER)

Aysegul Sahin


Federal Reserve Bank of New York
August 2009

CEPR Discussion Paper No. DP7425

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.

Number of Pages in PDF File: 52

Keywords: Labor Market Frictions, Labor Supply, Taxes

JEL Classification: E24, J22, J64

working papers series


Date posted: September 8, 2009  

Suggested Citation

Krusell, Per L., Mukoyama, Toshihiko, Rogerson, Richard and Sahin, Aysegul, A Three State Model of Worker Flows in General Equilibrium (August 2009). CEPR Discussion Paper No. DP7425. Available at SSRN: http://ssrn.com/abstract=1469924

Contact Information

Per L. Krusell (Contact Author)
Princeton University - Department of Economics ( email )
111 Fisher Hall
Princeton, NJ
United States
609-258-4003 (Phone)
609-258-6419 (Fax)
HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/
Stockholm University - Institute for International Economic Studies (IIES) ( email )
Stockholm University
10691 Stockholm, SE-10691
Sweden
+46 0 8 16 30 73 (Phone)
+46 0 8 16 41 77 (Fax)
HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Toshihiko Mukoyama
University of Virginia - Economics ( email )
1400 University Ave
Charlottesville, VA 22903
United States
CIREQ
C.P. 6128, Succursale Centre-ville
Montreal, Quebec H3C 3J7
Canada
Richard Rogerson
Arizona State University (ASU) - Economics Department ( email )
Tempe, AZ 85287-3806
United States
480-727-6671 (Phone)
602-965-0748 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Aysegul Sahin
Federal Reserve Bank of New York ( email )
33 Liberty Street
New York, NY 10045
United States
Feedback to SSRN (Beta)


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References:  49
Citations:  4

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