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Unemployment Volatility and Networks

Author

Listed:
  • Steven Kivinen

    (Department of Economics, Dalhousie University)

Abstract
I incorporate social networks into a search and matching model, allowing for congestion effects. The model predicts that the presence of network externalities increases the volatility of unemployment and other variables. I demonstrate analytically that aggregate matching functions exhibit decreasing returns to scale under certain conditions, that unemployment and matching rates have a larger response to productivity shocks, and that labour market tightness adjusts more slowly to its steady-state. Numerical simulations demonstrate that network effects can generate increases in the volatility of unemployment and matching rates, as well as increases in the autocorrelation of vacancies.

Suggested Citation

  • Steven Kivinen, 2017. "Unemployment Volatility and Networks," Working Papers daleconwp2017-02, Dalhousie University, Department of Economics.
  • Handle: RePEc:dal:wpaper:daleconwp2017-02
    as

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    File URL: http://wp.economics.dal.ca/RePEc/dal/wpaper/DalEconWP2017-02.pdf
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    References listed on IDEAS

    as
    1. Calvo-Armengol, Antoni & Zenou, Yves, 2005. "Job matching, social network and word-of-mouth communication," Journal of Urban Economics, Elsevier, vol. 57(3), pages 500-522, May.
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    7. Gabriele Cardullo, 2010. "Matching Models Under Scrutiny: An Appraisal Of The Shimer Puzzle," Journal of Economic Surveys, Wiley Blackwell, vol. 24(4), pages 622-656, September.
    8. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, September.
    9. Margaret Stevens, 2007. "New Microfoundations For The Aggregate Matching Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 847-868, August.
    10. Sedláček, Petr, 2014. "Match efficiency and firms' hiring standards," Journal of Monetary Economics, Elsevier, vol. 62(C), pages 123-133.
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    13. Lori A. Beaman, 2012. "Social Networks and the Dynamics of Labour Market Outcomes: Evidence from Refugees Resettled in the U.S," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(1), pages 128-161.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Social Networks; Unemployment; Search and Matching;
    All these keywords.

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