On the Cyclical Behavior of Employment, Unemployment and Labor Force Participation

47 Pages Posted: 22 Apr 2003

See all articles by Marcelo Veracierto

Marcelo Veracierto

Federal Reserve Bank of Chicago - Research Department

Date Written: November 2002

Abstract

In this paper I evaluate to what extent a real business cycle (RBC) model that incorporates search and leisure decisions can simultaneously account for the observed behavior of employment, unemployment and out-of-the-labor-force. This contrasts with the previous RBC literature, which analyzed employment or hours fluctuations by either lumping together unemployment and out-of-the-labor-force into a single non-employment state or assuming a fixed labor force participation. Once the three employment states are explicitly introduced I find that the RBC model generates highly counterfactual labor market dynamics.

Suggested Citation

Veracierto, Marcelo, On the Cyclical Behavior of Employment, Unemployment and Labor Force Participation (November 2002). Available at SSRN: https://ssrn.com/abstract=359220 or http://dx.doi.org/10.2139/ssrn.359220

Marcelo Veracierto (Contact Author)

Federal Reserve Bank of Chicago - Research Department ( email )

230 South LaSalle Street
Chicago, IL 60604-1413
United States
(312) 322-6595 (Phone)

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