A Matching Model of Non-Employment and Wage Pressure

Bank of England Working Paper No. 208

35 Pages Posted: 1 Oct 2004

See all articles by Andrew Brigden

Andrew Brigden

Bank of England

Jonathan Thomas

Bank of England - Structural Economic Analysis Division

Date Written: December 2003

Abstract

In this paper a matching model with variable search intensity that incorporates the inactive is developed and calibrated. The model is used to look at possible explanations for the recent sharp decline in the UK working-age unemployment rate, which has been accompanied by only a moderate reduction in the working-age inactivity rate. From the range of different shocks considered, the most plausible combination consists of a significant reduction in unemployment benefits, perhaps reflecting reduced coverage, coupled with an increase in the student population. According to the model, these shocks would not have produced an increase in aggregate wage pressure.

Keywords: Unemployment, inactivity, wage pressure, matching

JEL Classification: E24, J41

Suggested Citation

Brigden, Andrew and Thomas, Jonathan Mashe, A Matching Model of Non-Employment and Wage Pressure (December 2003). Bank of England Working Paper No. 208, Available at SSRN: https://ssrn.com/abstract=597583 or http://dx.doi.org/10.2139/ssrn.597583

Andrew Brigden

Bank of England ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

Jonathan Mashe Thomas (Contact Author)

Bank of England - Structural Economic Analysis Division ( email )

Threadneedle Street
London, EC2R 8AH
United Kingdom

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