TY - JOUR
T1 - Frictional unemployment with stochastic bubbles
AU - Vuillemey, Guillaume
AU - Wasmer, Etienne
N1 - Funding Information:
We are grateful to the editor (Peter Rupert), one anonymous associate editor and two anonymous referees for excellent feedback. We also thank participants at the NBER 2018 SI, 2017 Bubbles in Macroeconomics at CREI, the 2016 SaM conference (Amsterdam), OFCE-SKEMA in Nice, IIES Stockholm, CREI at Pompeu Fabra, U. Autonoma Barcelona, IUE Florence, UC Irvine Seminar, Stanford University, UC Santa Barbara, NYU AD and University of Southern California and HEC lunch seminar, in particular Vladimir Asriyan, Gadi Barlevy, Edouard Challe, Tom Cooley, Juan Dolado, Jordi Gali, Pablo Guerron-Quintanan, Wouter den Haan, Bob Hall, Christian Haefke, Tomohiro Hirano, Ryo Jinnai, Ramon Marimon, Finn Kydland, Albert Marcet, Alberto Martin, Guido Menzio, Sebastian Merkel, Alessandra Pelloni, Torsten Persson, Monika Piazzesi, Christopher Pissarides, Jean-Marc Robin, Guillaume Rocheteau, Peter Rupert, Robert Shimer, Eric Swanson, Jean Tirole, Jaume Ventura, Pengfei Wang, Philippe Weil and John Wooders. The paper was partly written during a stay at Stanford University (Etienne Wasmer) and at Harvard University (Guillaume Vuillemey), the hospitality of which is gratefully acknowledged. Financial support fromANR-11-LABX-0091 and ANR-11-IDEX- 0005-02 is gratefully acknowledged.
Publisher Copyright:
© 2019
PY - 2020/2
Y1 - 2020/2
N2 - We show that the volatility puzzle in labor economics (Shimer, 2005) stems from the inability of technology shocks to generate sufficient volatility of firm value. We introduce non-fundamental shocks to firm value, akin to bubbles, into an otherwise standard search-and-matching model. When calibrated to stock market data, stochastic bubbles significantly improve the ability of the matching model to quantitatively explain the volatility of the US labor market. An extension with multiple sectors improves the persistence of simulated labor market variables.
AB - We show that the volatility puzzle in labor economics (Shimer, 2005) stems from the inability of technology shocks to generate sufficient volatility of firm value. We introduce non-fundamental shocks to firm value, akin to bubbles, into an otherwise standard search-and-matching model. When calibrated to stock market data, stochastic bubbles significantly improve the ability of the matching model to quantitatively explain the volatility of the US labor market. An extension with multiple sectors improves the persistence of simulated labor market variables.
KW - Bubbles
KW - Labor frictions
KW - Unemployment volatility
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U2 - 10.1016/j.euroecorev.2019.103352
DO - 10.1016/j.euroecorev.2019.103352
M3 - Article
AN - SCOPUS:85077036270
VL - 122
JO - European Economic Review
JF - European Economic Review
SN - 0014-2921
M1 - 103352
ER -