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Search Frictions and the Labor Wedge, Murat Tasci, Andrea Pescatori

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
Table Of Contents
Cover Page; Title Page; Copyright Page; Contents; I. Introduction; II. Related Literature; III. The prototype real business cycle model; 1. Labor Wedge in the RBC Model; IV. Introducing Search Frictions and Employment Fluctuations; A. Households; B. Firms; C. Employment Contract and the Nash Bargaining; D. Equilibrium; E. The Wage Determination; F. The labor wedge; 2. Total Hours: Extensive vs. Intensive Margin; V. Results; A. Mapping the Models to the U.S. data; 3. The MRS and MPL in the Prototype Model; 4. Prototype vs. Search Model: Low Frequency
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (57 p.)
Specific Material Designation
Form Of Item

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