Gross Worker Flows and Fluctuations in the Aggregate Labor Market

55 Pages Posted: 23 Mar 2020 Last revised: 15 Jun 2020

See all articles by Per Krusell

Per Krusell

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

Toshihiko Mukoyama

Georgetown University - Department of Economics; CIREQ

Richard Rogerson

Arizona State University (ASU) - Economics Department; National Bureau of Economic Research (NBER); Princeton University - Woodrow Wilson School of Public and International Affairs

Aysegul Sahin

University of Texas at Austin

Date Written: March 2020

Abstract

We build a three-state general equilibrium model of the aggregate labor market that features both standard labor supply forces and labor market frictions. Our model matches key features of the cyclical properties of employment, unemployment, and nonparticipation as well as those of gross worker flows across these three labor market states. Our key finding is that shocks to labor market frictions play a dominant role in accounting for labor market fluctuations. This is in contrast to the focus of the traditional RBC literature, which emphasized how employment fluctuations arise as a consequence of labor supply responses to price changes induced by TFP shocks.

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Suggested Citation

Krusell, Per L. and Mukoyama, Toshihiko and Rogerson, Richard and Sahin, Aysegul, Gross Worker Flows and Fluctuations in the Aggregate Labor Market (March 2020). NBER Working Paper No. w26878, Available at SSRN: https://ssrn.com/abstract=3559167

Per L. Krusell (Contact Author)

Princeton University - Department of Economics ( email )

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Stockholm University - Institute for International Economic Studies (IIES) ( email )

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HOME PAGE: http://rincewind.iies.su.se/%7Ekrusell/

Centre for Economic Policy Research (CEPR)

London
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Toshihiko Mukoyama

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States

CIREQ

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Montreal, Quebec H3C 3J7
Canada

Richard Rogerson

Arizona State University (ASU) - Economics Department ( email )

Tempe, AZ 85287-3806
United States
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602-965-0748 (Fax)

National Bureau of Economic Research (NBER)

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Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

Aysegul Sahin

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

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