Abstract
The flow utility of unemployment plays a crucial role in labor search and matching models. Recent evidence by Chodorow-Reich and Karabarbounis suggests that the flow utility is high on average, volatile, and strongly procyclical. Taken together, these facts imply that labor search and matching models perform worse than prevailing conventional wisdom. In contrast, we build a model where unemployed workers choose between home production and job search. Procyclical job search implies that the effective unemployment benefit is countercyclical. Our results suggest that omitting endogenous search will upwardly bias the measured correlation between effective unemployment benefits and productivity.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.