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Variability of Labor Market Fluctuations and the Timing of Structural Reforms,” co-authored with Carlo Pizzinelli

Wednesday 30 November 2016, 1.00PM to 2:00pm

Speaker(s): Francesco Zanetti (Oxford)

Host: Joao R Madeira

Abstract: This paper documents two important stylized facts in U.S. labor market data. First, the variability of the unemployment rate, the job finding rate and the job separation rate is larger in periods of low productivity. Second, the unemployment rate and the job separation rate rise fast above their historical mean and decline in small steps. A Diamond-Mortensen-Pissarides (DMP) with endogenous job separation and on-the-job search replicates fairly well these empirical regularities. Endogenous job separation embeds powerful state dependency in the cyclical fluctuations of labor market variables. The job separation rate is larger in periods of low aggregate productivity since only high-productive jobs survive and adverse aggregate shocks displace a large number of low-productive jobs compared to periods of high aggregate productivity. The timing of labor market reforms is critical and the short-run cost of permanently removing a layoff tax is twice as small in periods of low aggregate productivity.

Location: ARRC Auditorium ARC014, Alcuin College

Admission: Everyone welcome