Published in:Sveriges Rikbank Working Paper Series ; No. 353
Extent:
1 Online-Ressource (34 p)
Language:
English
DOI:
10.2139/ssrn.3263492
Identifier:
Origination:
Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 2018 erstellt
Description:
We show that business cycles reduce welfare through a decrease in the average level of employment in a labor market search model with learning on-the-job and skill loss during unemployment. A negative correlation between unemployment and vacancies implies, via the concavity of the matching function, that business cycles reduce the average number of new jobs and employment. Learning on-the-job implies that the decrease in employment reduces aggregate human capital. This, in turn, reduces the incentives to post vacancies, further decreasing employment and human capital. We quantify this mechanism and nd large output and welfare costs of business cycles