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Search Frictions and the Labor Wedge
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Author/Editor: |
Pescatori, Andrea | Tasci, Murat |
| Authorized for Distribution: |
May 1, 2011 |
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Electronic Access: |
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.
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Summary: This paper shows that labor market search frictions do not explain fluctuations in the labor wedge per se. However, the introduction of extensive and intensive margin clarifies that measuring the MRS in terms of total hours artificially introduces procyclicality in the MRS. When the MRS is correctly measured in terms of hours per worker, the labor wedge obtained is less variable than the one of the competitive model. Finally, we show that it is possible to measure a strongly procyclical labor wedge when the actual data generating process is a search model that allows for movements in both margins.
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Order a print copy
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Series: |
Working Paper No. 11/117 |
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Subject(s): |
Accounting | Business cycles | Economic models | Employment | Labor markets | Unemployment |
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Author's keyword(s): |
Labor Market Search; Business Cycle Accounting; Labor Wedge |
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Published: |
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May 1, 2011 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2011117 |
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Pages: |
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29 |
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Price: |
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US$18.00 (Academic Rate: US$18.00 )
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