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PhD Candidate, Department of Economics, LSE
Phone number: +44 (0)78 3851 1248
Room number: 32L.1.06
Address: Department of Economics
London School of Economics and Political Science
London WC2A 2AE
Increases in uncertainty lead to increases in the unemployment rate. Using US data, I show empirically that this is due to both an increase in the separation rate and a decrease in the job-finding rate. By contrast, standard search and matching models predict an increase in the job finding rate in response to an increase in the cross-sectional dispersion of firms’ productivity levels. To explain observed responses in labour market transition rates, I develop a search and matching model in which heterogeneous firms face a decreasing returns to scale technology, firms can hire multiple workers, and job flows (job creation and job destruction) do not necessarily coincide with worker flows (hires and separations). Costly job creation (in addition to the usual hiring cost) is key to obtaining a decrease in the job-finding rate after an increase in uncertainty. Standard numerical solution techniques cannot be used to obtain an accurate solution efficiently and I propose an alternative algorithm to overcome this problem.
Unemployment (Fears), Precautionary Savings, and Aggregate Demand (with Wouter den Haan and Pontus Rendahl)
Solving Heterogeneous Agents Models using Past Error Terms of the Law of Motion