Unemployment and Hours of Work: The North Atlantic Divide Revisited*

Abstract

I study the cyclical behavior of an equilibrium search model with endogenous job creation and destruction, with focus on the model's failure to match the observed cyclical volatility of unemployment. Job creation in the model is influenced by wages in new matches. I summarize microeconometric evidence on wages in new matches and show that the key model elasticities are consistent with the evidence. Therefore explanations of the unemployment volatility puzzle have to preserve the cyclical volatility of wages. I discuss some extensions of the model that can increase cyclical unemployment volatility through mechanisms other than wage stickiness.

Work hour mismatches and on-the-job search

“…First, this paper addresses the issue of working hours in the frictional labor market. Pissarides (2007) and Kudoh and Sasaki (2011) also address this issue using the job search model. However, in these studies, authors assume ex-ante homogeneous workers and then rule out work hour mismatches.…”

Employment and Hours of Work

“…Understanding how firms utilize these two margins is crucial for understanding the long-run trend in hours of work (Prescott, 2004;Rogerson, 2006;Pissarides, 2007), the movements of employment and hours over the business cycle (Burnside et al, 1993), the likely effect of regulation of hours of work (Hoel, 1986;Booth and Schiantarelli, 1987;Hunt, 1998;Marimon and Zilibotti, 2000), and cross-sectional differences in hours of work (Hamermesh, 1993), to name a few.…”

“…Recent decades have witnessed declines in hours of work in major developed economies (Rogerson, 2006; Pissarides, 2007). Despite a decline in average working hours, disparities in working hours among workers have gradually increased.…”

Technology Adoption, Turbulence, and the Dynamics of Unemployment

“…These explanations include overly generous unemployment insurance systems (Ljungqvist and Sargent ), the labor productivity slowdown (Pissarides ), and labor taxes (Hagedorn, Manovskii, and Stetsenko ). Blanchard () provides an assessment of the literature on the European unemployment question.…”