Learning on the job and the cost of business cycles

Arbeitspapier

We show that business cycles reduce welfare through a decrease in the average level of employ- ment in a labor market search model with learning on-the-job and skill loss during unemployment. A negative correlation between unemployment and vacancies implies, via the concavity of the matching function, that business cycles reduce the average number of new jobs and employment. Learning on-the-job implies that the decrease in employment reduces aggregate human capital. This, in turn, reduces the incentives to post vacancies, further decreasing employment and human capital. We quantify this mechanism and .nd large output and welfare costs of business cycles.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Sveriges Riksbank Working Paper Series ; No. 353

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: Search and matching ; labor market ; human capital ; stabilization policy ; skill loss

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Walentin, Karl ; Westermark, Andreas
• Event: Veröffentlichung
• (who): Sveriges Riksbank
• (where): Stockholm
• (when): 2018

Further information

• Handle: http://hdl.handle.net/10419/189953
• Last update: 10.03.2025, 11:43 AM CET