Abstract

http://ssrn.com/abstract=2241695
 
 

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Unemployment Crises


Nicolas Petrosky-Nadeau


Carnegie Mellon University - David A. Tepper School of Business; Federal Reserve Banks - Federal Reserve Bank of San Francisco

Lu Zhang


Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

December 1, 2013

Fisher College of Business Working Paper No. 2014-03-11
Charles A. Dice Center Working Paper No. 2014-11

Abstract:     
A search and matching model, when calibrated to the mean and volatility of unemployment in the postwar sample, can potentially explain the unemployment crisis in the Great Depression. The limited responses of wages from credible bargaining to labor market conditions, along with the congestion externality from matching frictions, cause the unemployment rate to rise sharply in recessions but decline gradually in booms. The frequency, severity, and persistence of unemployment crises in the model are quantitatively consistent with U.S. historical time series. The welfare gain from eliminating business cycle fluctuations is large.

Number of Pages in PDF File: 49

Keywords: Search and matching frictions, unemployment crises, the unemployment volatility puzzle, projection, nonlinear impulse response functions, the Great Depression

JEL Classification: E24, E32, J63, J64

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Date posted: March 31, 2013 ; Last revised: July 16, 2014

Suggested Citation

Petrosky-Nadeau, Nicolas and Zhang, Lu, Unemployment Crises (December 1, 2013). Fisher College of Business Working Paper No. 2014-03-11. Available at SSRN: http://ssrn.com/abstract=2241695 or http://dx.doi.org/10.2139/ssrn.2241695

Contact Information

Nicolas Petrosky-Nadeau (Contact Author)
Carnegie Mellon University - David A. Tepper School of Business ( email )
5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
HOME PAGE: http://sites.google.com/site/npetroskynadeau/

Federal Reserve Banks - Federal Reserve Bank of San Francisco ( email )
101 Market Street
San Francisco, CA 94105
United States
Lu Zhang
Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
585-267-6250 (Phone)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  27
Citations:  1
Footnotes:  13

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