The Unemployment Accelerator

Arbeitspapier

This paper studies the unemployment accelerator, a mechanism where workers directly affect the firms’ financial conditions, and, in turn, firms’ financial conditions feedback again to the real economy. The unemployment accelerator builds on two key assumptions: search frictions in the labor market and firms’ default risk. The former assumption implies a positive relation between the firm’s value and its number of workers; the latter assumption entails a tight connection between the value of the workers and the firm’s incentives to default. We develop and estimate a model with these two frictions together with firm-level heterogeneity; and show the model matches firm-level statistics as well as business cycle fluctuations in labor and financial markets. We provide compelling micro-evidence of the unemployment accelerator: a 10% increase in a firm’s number of workers is associated with a 4% increase in its market value and a 6% decline in its probability of default. We show that our model can account for these facts, and that the two key assumptions we make are essential for this.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: CESifo Working Paper ; No. 6248

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy
• Thema: unemployment ; default risk ; credit market frictions ; search frictions ; wage bargaining

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Blanco, Julio ; Navarro, Gaston
• Ereignis: Veröffentlichung
• (wer): Center for Economic Studies and ifo Institute (CESifo)
• (wo): Munich
• (wann): 2016

Weitere Informationen

• Handle: http://hdl.handle.net/10419/149335
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ