Working Paper
The labor wedge as a matching friction
Abstract: The labor wedge accounts for a large fraction of business cycle fluctuations. This paper uses a search and matching model to decompose the labor wedge into three classes of labor market frictions and evaluate their role. We find that frictions to job destruction and bargaining commonly considered in the search literature are not helpful in explaining the labor wedge. We also identify an asymmetric effect of separation, bargaining and matching frictions on unemployment, as well as a potential solution to Shimer's puzzle.
Keywords: Business cycles - Econometric models; Labor supply; Unemployment; Labor turnover;
Access Documents
File(s):
File format is application/pdf
https://www.dallasfed.org/~/media/documents/research/papers/2010/wp1004.pdf
Description: Full text
Bibliographic Information
Provider: Federal Reserve Bank of Dallas
Part of Series: Working Papers
Publication Date: 2010
Number: 1004
Note: Published as: Cheremukhin, Anton A. and Paulina Restrepo-Echabarria (2014), "The Labor Wedge as a Matching Friction," European Economic Review 68: 71-92.