Working Paper

Aggregate unemployment in Krusell and Smith’s economy: a note

Abstract: Using data on workers? flows into and out of employment, unemployment, and not-in-the-labor-force, I construct transition probabilities between ?employment? and ?unemployment? that can be used in the calibration of economies such as Krusell and Smith?s (1998). I show that calibration in Krusell and Smith has some counterfactual features. Yet the gains from adopting alternative calibrations in terms of matching the data are not very large, unless one assumes that the duration of unemployment spells is well above what is usually assumed in the literature.

Bibliographic Information

Provider: Federal Reserve Bank of Atlanta

Part of Series: FRB Atlanta Working Paper

Publication Date: 2005

Number: 2005-06