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Unemployment Volatility and Networks

Author

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  • 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
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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
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    8. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, September.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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

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