Unemployment Crises

Petrosky-Nadeau, Nicolas; Zhang, Lu

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Unemployment Crises

NBER Working Paper No. w19207

46 Pages Posted: 12 Jul 2013 Last revised: 26 Jun 2022

See all articles by Nicolas Petrosky-Nadeau

Nicolas Petrosky-Nadeau

Federal Reserve Banks - Federal Reserve Bank of San Francisco

Lu Zhang

Ohio State University - Fisher College of Business; National Bureau of Economic Research (NBER)

There are 3 versions of this paper

Date Written: July 2013

Abstract

A search and matching model, when calibrated to the mean and volatility of unemployment in the postwar sample, can potentially explain the large unemployment dynamics in the Great Depression. The limited response of wages to labor market conditions from credible bargaining and the congestion externality from matching frictions cause the unemployment rate to rise sharply in recessions but decline gradually in booms. The frequency, severity, and persistence of unemployment crises in the model are quantitatively consistent with U.S. historical time series.

Suggested Citation: Suggested Citation

Petrosky-Nadeau, Nicolas and Zhang, Lu, Unemployment Crises (July 2013). NBER Working Paper No. w19207, Available at SSRN: https://ssrn.com/abstract=2292828