Arbeitspapier

Endogenous labor market participation and the business cycle

Existing models of equilibrium unemployment with endogenous labor market participation are complex, generate procyclical unemployment rates and cannot match unemployment variability relative to GDP. We embed endogenous participation in a simple, tractable job market matching model, show analytically how variations in the participation rate are driven by the cross-sectional density of home productivity near the participation threshold, and how this density translates into an extensive-margin labor supply elasticity. A calibration of the model to macro data not only matches employment and participation variabilities but also generates strongly countercyclical unemployment rates. With some wage rigidity the model also matches unemployment variations well. Furthermore, the labor supply elasticity implied by our calibration is consistent with microeconometric evidence for the US.

Sprache
Englisch

Erschienen in
Series: IZA Discussion Papers ; No. 2029

Klassifikation
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Labor Force and Employment, Size, and Structure
Unemployment: Models, Duration, Incidence, and Job Search
Thema
matching models
labor market participation
labor supply elasticity
time aggregation

Ereignis
Geistige Schöpfung
(wer)
Haefke, Christian
Reiter, Michael
Ereignis
Veröffentlichung
(wer)
Institute for the Study of Labor (IZA)
(wo)
Bonn
(wann)
2006

Handle
Letzte Aktualisierung
10.03.2025, 11:43 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Haefke, Christian
  • Reiter, Michael
  • Institute for the Study of Labor (IZA)

Entstanden

  • 2006

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