A note on the unemployment volatility puzzle

Research output: Contribution to journalArticlepeer-review

1 Citation (SciVal)
3 Downloads (Pure)

Abstract

This paper features an economy with frictional labour markets, Nash bargaining, cyclical opportunity cost of employment and demand-determined output. I show that the model generates big responses of unemployment to productivity movements. The key insight is that strongly countercyclical markups amplify the impact of aggregate shocks on the fundamental surplus, and as a consequence, on labour market outcomes. This answers the critique of Chodorow-Reich and Karabarbounis that the cyclicality of the opportunity cost poses a challenge to the solution of the unemployment volatility puzzle.
Original languageEnglish
Pages (from-to)55-74
Number of pages20
JournalOxford Economic Papers
Volume75
Issue number1
Early online date28 Apr 2022
DOIs
Publication statusPublished - 1 Jan 2023

Bibliographical note

Funding
No funding was provided for this work.

Fingerprint

Dive into the research topics of 'A note on the unemployment volatility puzzle'. Together they form a unique fingerprint.

Cite this