Title: Factor complementarity and labour market dynamics
Authors: Di Pace, Federico ×
Villa, Stefania #
Issue Date: 2016
Series Title: European Economic Review vol:82 issue:2016 pages:70-112
Abstract: We propose and estimate a dynamic stochastic general equilibrium model featuring search and matching frictions, deep habits and a CES production function. The model successfully replicates the cyclical properties of labour market variables in the US economy for three main reasons. First, two of the endogenous mechanisms of the model – factor complementarity and unemployment benefits – play a key role for explaining the amplification in unemployment and vacancies. Second, deep habits have a smaller but significant role as an endogenous mechanism. Third, capital-augmenting productivity, investment-specific and matching efficiency innovations explain large part of the variation in labour market variables.
ISSN: 0014-2921
Publication status: published
KU Leuven publication type: IT
Appears in Collections:Research Center of International Economics, Leuven
× corresponding author
# (joint) last author

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