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Autre Publication Scientifique Année : 2014

Welfare Cost of Fluctuations: when Labor Market Search Interacts with Financial Frictions

Résumé

We provide a quantitative assessment of welfare costs of fluctuations in a search model with financial frictions. The matching process in the labor market leads positive shocks to reduce unemployment less than negative shocks increase it. We show that the magnitude of this non-linearity is magnified frictions. This asymmetric effect of the business cycle leads to sizable welfare costs. The model also accounts for the responsiveness of the job finding rate to the business cycle as financial frictions endogenously generate counter-cyclical opportunity costs of opening a vacancy and wage sluggishness.
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Dates et versions

halshs-01020872 , version 1 (08-07-2014)

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  • HAL Id : halshs-01020872 , version 1

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Eleni Iliopulos, François Langot, Thepthida Sopraseuth. Welfare Cost of Fluctuations: when Labor Market Search Interacts with Financial Frictions. 2014. ⟨halshs-01020872⟩
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