UNEMPLOYMENT BENEFITS AND MATCHING EFFICIENCY IN AN ESTIMATED DSGE MODEL WITH LABOR MARKET SEARCH FRICTIONS

2017 ◽  
Vol 21 (8) ◽  
pp. 2033-2069 ◽  
Author(s):  
Ji Zhang
Keyword(s):  
Unemployment Rate ◽  
Labor Demand ◽  
The United States ◽  
Unemployment Benefits ◽  
The Great Recession ◽  
Search And Matching Frictions ◽  
Matching Efficiency ◽  
Market Search ◽  
Dynamic Stochastic ◽  
Labor Market Search

To explain the high and persistent unemployment rate in the United States during and after the Great Recession, this effort develops and estimates a dynamic stochastic general equilibrium model with search and matching frictions and shocks to unemployment benefits and matching efficiency. It finds that unemployment benefits play an important role in the cyclical movement of unemployment through their effects on labor demand, a channel overlooked in previous studies. From the second half of 2008 to 2011, extended unemployment benefits may have increased the overall unemployment rate by one percentage point. In contrast, matching efficiency changes had less effect on the cyclical movement of unemployment for the same period, but significantly slowed down the recovery after 2012.

scholarly journals Evolution of Modern Business Cycle Models: Accounting for the Great Recession

2018 ◽  
Vol 32 (3) ◽  
pp. 141-166 ◽  
Author(s):  
Patrick J. Kehoe ◽  
Virgiliu Midrigan ◽  
Elena Pastorino
Keyword(s):  
Business Cycle ◽  
Great Recession ◽  
The United States ◽  
Dsge Models ◽  
Real Business Cycle ◽  
Business Cycle Theory ◽  
The Great Recession ◽  
Modern Business ◽  
Dynamic Stochastic ◽  
The Rich

Modern business cycle theory focuses on the study of dynamic stochastic general equilibrium (DSGE) models that generate aggregate fluctuations similar to those experienced by actual economies. We discuss how these modern business cycle models have evolved across three generations, from their roots in the early real business cycle models of the late 1970s through the turmoil of the Great Recession four decades later. The first generation models were real (that is, without a monetary sector) business cycle models that primarily explored whether a small number of shocks, often one or two, could generate fluctuations similar to those observed in aggregate variables such as output, consumption, investment, and hours. These basic models disciplined their key parameters with micro evidence and were remarkably successful in matching these aggregate variables. A second generation of these models incorporated frictions such as sticky prices and wages; these models were primarily developed to be used in central banks for short-term forecasting purposes and for performing counterfactual policy experiments. A third generation of business cycle models incorporate the rich heterogeneity of patterns from the micro data. A defining characteristic of these models is not the heterogeneity among model agents they accommodate nor the micro-level evidence they rely on (although both are common), but rather the insistence that any new parameters or feature included be explicitly disciplined by direct evidence. We show how two versions of this latest generation of modern business cycle models, which are real business cycle models with frictions in labor and financial markets, can account, respectively, for the aggregate and the cross-regional fluctuations observed in the United States during the Great Recession.

scholarly journals DIAGNOSING LABOR MARKET SEARCH MODELS: A MULTIPLE-SHOCK APPROACH

2012 ◽  
Vol 18 (3) ◽  
pp. 548-572 ◽  
Author(s):  
Kenneth Beauchemin ◽  
Murat Tasci
Keyword(s):  
Labor Market ◽  
Business Cycle ◽  
Shock Model ◽  
Business Cycle Accounting ◽  
Matching Efficiency ◽  
Market Search ◽  
The Business Cycle ◽  
Labor Market Search ◽  
Market Variables ◽  
Multiple Shock

We construct a multiple-shock, discrete-time version of the Mortensen–Pissarides labor market search model to investigate the basic model's well-known tendency to underpredict the volatility of key labor market variables. In addition to the standard labor productivity shock, we introduce shocks to matching efficiency and job separation. We estimate the multiple-shock model and then simulate its properties. Although it generates significantly more volatility while preserving the Beveridge curve relationship, the multiple-shock model generates counterfactual implications for the cyclicality of job separations. Using a business cycle accounting approach, next we show that the model requires significantly procyclical and volatile matching efficiency and counterfactually procyclical job separations to render the observed data without error. We conjecture that the basic Mortensen–Pissarides model lacks mechanisms to generate sufficiently strong labor market reallocation over the business cycle, and suggest nontrivial labor force participation and job-to-job transitions as promising avenues of research.

scholarly journals Remittances from Mexican migrants in the United States during the time of COVID-19

2020 ◽  
Vol 5 (2) ◽  
pp. 143-153
Author(s):  
Rodolfo Garcia Zamora ◽  
Selene Gaspar Olvera
Keyword(s):  
United States ◽  
Unemployment Rate ◽  
Great Recession ◽  
The United States ◽  
Economic Recovery ◽  
Mexican Migrants ◽  
The Great Recession

Following the Great Recession of 2007-2009 in the United States, Mexican migrants’ remittances began to grow steadily in 2014 until they reached a historical level of US$36 billion in 2019. This figure was at US$4 billion in March 2020 when Mexico had been suffering the effects of COVID-19 for one month. In April, remittances from Mexican migrants in the United States dropped 28%, as their unemployment rate reached 17%. Recuperating remittance levels will depend on economic recovery policies in the United States, and on reducing unemployment for Mexican migrants in the sectors where they have the biggest presence.

scholarly journals Reassessing the Effects of Extending Unemployment Insurance Benefits

2014 ◽  
pp. 1-6
Author(s):  
Pedro Amaral ◽  
Jessica Ice
Keyword(s):  
Unemployment Insurance ◽  
Unemployment Rate ◽  
Great Recession ◽  
Job Creation ◽  
Unemployment Benefits ◽  
Insurance Benefits ◽  
The Great Recession ◽  
High Level ◽  
The Impact ◽  
The Way

To deal with the high level of unemployment during the Great Recession, lawmakers extended the availability of unemployment benefits—all the way to 99 weeks in the states where unemployment was highest. A recent study has found that the extensions served to increase unemployment significantly by putting upward pressure on wages, leading to less jobs creation by firms. We replicate the methodology of this study with an updated and longer sample and find a much smaller impact. We estimate that the impact of extending benefits on unemployment through wages and job creation can, at its highest, account for only one-fourth of the increase in the unemployment rate; an impact that is much lower than other estimates in the literature.

Housing market and labor market search

2018 ◽  
Vol 19 (1) ◽  
Author(s):  
Christopher Limnios
Keyword(s):  
Labor Market ◽  
Real Estate ◽  
Housing Market ◽  
Empirical Relationship ◽  
Search And Matching ◽  
Search And Matching Frictions ◽  
Market Search ◽  
Empirical Regularities ◽  
Land Use Policies ◽  
Labor Market Search

Abstract Current models fail to concurrently account for several important empirical regularities in the housing and labor markets. I augment the Diamond-Mortensen-Pissarides (DMP) search and matching model of the labor market with a housing market characterized by search and matching frictions, integrating both markets in a coherent macroeconomic model. The model provides a framework to explain how shocks and frictions which originate in the labor market spill over into the housing market and vise versa. The model accounts for procyclical, serially correlated real estate values, rental rates and expected real estate appreciation. Further, it accounts for increases in wages, housing costs and willingness to commute as a result of increases in geographic amenities. The model is also consistent with the empirical relationship between vacancy rates in the housing market and separation rates in the labor market. Simulations demonstrate that certain land-use policies can mitigate permanent shocks to labor productivity and the level of geographic amenities.

scholarly journals The Great Recession’s Effect on Entrepreneurship

2011 ◽  
pp. 1-4
Author(s):  
Scott Shane
Keyword(s):  
United States ◽  
Gross Domestic Product ◽  
Great Depression ◽  
Unemployment Rate ◽  
Great Recession ◽  
The United States ◽  
Domestic Product ◽  
Economic Downturn ◽  
The Great Recession ◽  
The Great Depression

Between December 2007 and June 2009, the United States suffered its biggest economic downturn since the Great Depression. Dubbed the Great Recession, this economic contraction saw gross domestic product decline 4 percent and the unemployment rate more than double from 4.9 percent to 10.1 percent.

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