Declining search frictions, unemployment, and growth

Paolo Martellini, Guido Menzio

    Research output: Contribution to journalArticlepeer-review

    Abstract

    For a search-theoretic model of the labor market, we seek conditions for the existence of a balanced growth path (BGP), where unemployment, vacancy, and worker’s transitions rates remain constant in the face of improvements in the production and search technologies. A BGP exists iff firm-worker matches are inspection goods and the quality of a match is drawn from a Pareto distribution. Declining search frictions contribute to growth with an intensity determined by the tail coefficient of the Pareto distribution. We develop a strategy to measure the rate of decline of search frictions and their contribution to growth.

    Original languageEnglish (US)
    Pages (from-to)4387-4437
    Number of pages51
    JournalJournal of Political Economy
    Volume128
    Issue number12
    DOIs
    StatePublished - Dec 2020

    ASJC Scopus subject areas

    • Economics and Econometrics

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