On the cyclical behavior of employment, unemployment and labor force participation |
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Authors: | Marcelo Veracierto |
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Affiliation: | Research Department, Federal Reserve Bank of Chicago, 230 South LaSalle Street, Chicago, IL 60604, USA |
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Abstract: | In this paper I evaluate to what extent a real business cycle (RBC) model that incorporates search and home production decisions can simultaneously account for the observed behavior of employment, unemployment and out-of-the-labor-force. This contrasts with the previous RBC literature, which analyzed employment or hours fluctuations either by lumping together unemployment and out-of-the-labor-force into a single non-employment state or by assuming a fixed labor force. Once the three employment states are explicitly introduced I find that the RBC model generates highly counterfactual labor market dynamics. |
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Keywords: | E32 J63 J64 |
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