Beveridgean Unemployment Gap

25 Pages Posted: 18 Nov 2019

See all articles by Pascal Michaillat

Pascal Michaillat

Brown University - Department of Economics

Emmanuel Saez

University of California, Berkeley

Multiple version iconThere are 2 versions of this paper

Date Written: November 2019

Abstract

This paper proposes a new method to estimate the unemployment gap (the actual unemployment rate minus the efficient rate). While lowering unemployment puts more people into work, it forces firms to post more vacancies and devote more resources to recruiting. This unemployment-vacancy tradeoff, governed by the Beveridge curve, determines the efficient unemployment rate. Accordingly, the unemployment gap can be measured from three sufficient statistics: the elasticity of the Beveridge curve, cost of recruiting, and social cost of unemployment. In the United States the unemployment gap is countercyclical, reaching 1.5--6.5 percentage points in slumps. Thus the US labor market appears inefficient---especially inefficiently slack in slumps.

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Suggested Citation

Michaillat, Pascal and Saez, Emmanuel, Beveridgean Unemployment Gap (November 2019). NBER Working Paper No. w26474. Available at SSRN: https://ssrn.com/abstract=3488974

Pascal Michaillat (Contact Author)

Brown University - Department of Economics ( email )

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United States

HOME PAGE: http://www.pascalmichaillat.org

Emmanuel Saez

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

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