Business Cycle Asymmetries and the Labor Market

40 Pages Posted: 21 Mar 2016 Last revised: 8 Sep 2022

See all articles by Britta Kohlbrecher

Britta Kohlbrecher

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Christian Merkl

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg; IZA Institute of Labor Economics

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Abstract

This paper shows that the matching function and the Beveridge curve in the United States exhibit strong nonlinearities over the business cycle. These patterns can be replicated by enhancing a search and matching model with idiosyncratic productivity shocks for new contacts. Large negative aggregate shocks move the hiring cutoff point into a part of the idiosyncratic density function with higher density and thereby generate large, asymmetric job-finding rate and unemployment reactions. Our proposed mechanism is of high relevance as it leads to time varying effects of certain policy interventions.

Keywords: unemployment, job-finding rate, Beverdige curve, matching function, business cycle asymmetries, effectiveness of policy

JEL Classification: E24, E32, J63, J64

Suggested Citation

Kohlbrecher, Britta and Merkl, Christian, Business Cycle Asymmetries and the Labor Market. IZA Discussion Paper No. 9816, Available at SSRN: https://ssrn.com/abstract=2750299

Britta Kohlbrecher (Contact Author)

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg ( email )

Schloßplatz 4
Erlangen, DE 91054
Germany

Christian Merkl

University of Erlangen-Nuremberg-Friedrich Alexander Universität Erlangen Nürnberg

Schloßplatz 4
Erlangen, DE Bavaria 91054
Germany

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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