Beveridgean Unemployment Gap

25 Pages Posted: 3 May 2021 Last revised: 7 Oct 2021

See all articles by Pascal Michaillat

Pascal Michaillat

Brown University

Emmanuel Saez

University of California, Berkeley

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.

Suggested Citation

Michaillat, Pascal and Saez, Emmanuel, Beveridgean Unemployment Gap (November 2019). NBER Working Paper No. w26474, Available at SSRN: https://ssrn.com/abstract=3838468

Pascal Michaillat (Contact Author)

Brown University

Box 1860
Providence, RI 02912
United States

Emmanuel Saez

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
19
Abstract Views
56
PlumX Metrics