Data Management

Business Cycles In The Equilibrium Model Of Labor Market Search And Self-Insurance

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Executive Summary

The author introduce risk-averse preferences, labor-leisure choice, capital, individual productivity shocks, and market incompleteness to the standard Mortensen-Pissarides model of search and matching and explore the model's cyclical properties. The main purpose of the paper is to embed the standard labor search and matching model into the standard business cycle model with risk-averse workers, labor-leisure choice, capital, individual productivity shocks, and market incompleteness, and re-examine the puzzle presented by Shimer (2005). The Mortensen-Pissarides search and matching model has become the standard theory of equilibrium unemployment (Mortensen and Pissarides (1994), Pissarides (2001)).

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