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Title: Equilibrium Unemployment

Author(s): Joao F Gomes, Jeremy Greenwood and Sérgio Rebelo

Publication Date: March 1997

Keyword(s): Business Cycles and Unemployment

Programme Area(s): International Macroeconomics

Abstract: A search-theoretic general equilibrium model of frictional unemployment is shown to be consistent with some of the key regularities of unemployment over the business cycle. In the model the return to a job moves stochastically. Agents can choose either to quit and search for a better job, or continue working. Search generates job offers that agents can accept or reject. Two distinguishing features of current work, relative to the existing business cycle literature on labour market fluctuations, are: (i) the decision to accept or reject jobs is modelled explicitly; and (ii) there is imperfect insurance against unemployment.

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Bibliographic Reference

Gomes, J, Greenwood, J and Rebelo, S. 1997. 'Equilibrium Unemployment'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1602