Entry and Exit, Unemployment, and the Business Cycle

Bernstein, Joshua; Richter, Alexander W.; Throckmorton, Nathaniel A.

doi:10.24149/wp2018r1

wp 2021

DOI: 10.24149/wp2018r1

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Entry and Exit, Unemployment, and the Business Cycle

Joshua Bernstein¹,

Alexander W. Richter²,

Nathaniel A. Throckmorton³

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2021

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“…In contrast, Petrosky-Nadeau et al (2018) generate realistic disaster dynamics in a textbook model with a DRW matching function 3. Others include Zhang (2017, 2021),Ferraro and Fiori (2020), andBernstein et al (2020).…”

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confidence: 99%

Nonlinear Search and Matching Explained

Bernstein¹,

Richter²,

Throckmorton³

2021

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Competing explanations for the sources of nonlinearity in search and matching models indicate that they are not fully understood. This paper derives an analytical solution to a textbook model that highlights the mechanisms that generate nonlinearity and quantifies their contributions. Procyclical variation in the matching elasticity creates nonlinearity in the job finding rate, which interacts with the law of motion for unemployment. These results show the matching function choice is not innocuous. Quantitatively, the Den Haan et al. (2000) matching function more than doubles the skewness of unemployment and welfare cost of business cycles, compared to the Cobb-Douglas specification.

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confidence: 99%

Nonlinear Search and Matching Explained

Bernstein¹,

Richter²,

Throckmorton³

2021

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Entry and Exit, Unemployment, and the Business Cycle

Cited by 1 publication

References 48 publications

Nonlinear Search and Matching Explained

Nonlinear Search and Matching Explained

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