Labor Market Search in Emerging Economies

52 Pages Posted: 11 Mar 2010

See all articles by Emine Boz

Emine Boz

International Monetary Fund (IMF)

Ceyhun Bora Durdu

Federal Reserve Board

Nan Li

Ohio State University (OSU)

Date Written: December 2009


This paper shows that labor markets of emerging economies are characterized by large fluctuations in wages while employment fluctuations are subdued. We find that a real business cycle model of a small open economy that embeds a Mortensen-Pissarides type of search-matching frictions can account for these aforementioned regularities. Moreover, the joint interaction of countercyclical interest rates and search-matching frictions can go a long way in accounting for higher consumption variability relative to output and countercyclical current account observed in emerging markets. Extending this baseline model to incorporate procyclical variations in the technical efficiency at which matches are generated, the model can match the unemployment variability observed in the data.

Keywords: Emerging markets, labor markets, business cycles, search frictions

JEL Classification: F41, E44, D82

Suggested Citation

Boz, Emine and Durdu, Ceyhun Bora and Li, Nan, Labor Market Search in Emerging Economies (December 2009). Available at SSRN: or

Emine Boz

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Ceyhun Bora Durdu (Contact Author)

Federal Reserve Board ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
2024523775 (Phone)


Nan Li

Ohio State University (OSU) ( email )

Blankenship Hall-2010
901 Woody Hayes Drive
Columbus, OH OH 43210
United States

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