TITLE:
The Unemployment Volatility Puzzle: A Note on the Role of Reference Points
AUTHORS:
Vincent Boitier
KEYWORDS:
Reference Points, Unemployment Volatility, Job Matching, Sequential Bargaining
JOURNAL NAME:
Theoretical Economics Letters,
Vol.5 No.1,
February
12,
2015
ABSTRACT: This theoretical note aims at studying the role of reference points in
generating unemployment volatility. For this
purpose, I introduce the notion of reference points in a standard Mortensen-Pissarides
model. I obtain two results. First, I find that the obtained model is similar
to the one found by Pissarides in 2009. Second, I show that the introduction of
reference points can increase significantly unemployment volatility through a
mechanism à la Hagerdorn and Manovskii.