On unemployment cycles in the Euro Area, 1999–2018

The U.S. Labor Income Share and Automation Shocks

“…Worth pointing out is the fact that when the model is estimated only on multiple wage indicators, the pro-cyclicality of the LS is further amplified (0.7) since the extracted wage is heavily influenced by the earnings series which is more pro-cyclical than compensation. The present paper, therefore, demonstrates that including multiple wage indicators-an approach undertaken in several papers (Charalampidis 2019;Galí, Smets, and Wouters 2012a;Justiniano, Primiceri, and Tambalotti 2013;Lindé, Smets, and Wouters 2016) aiming to strengthen the identification of wage markup shocks-might entail implications that are at odds with the data.…”

“…I apply the state space approach of Chan and Jeliazkov (), along the lines of Charalampidis (), that leads to computational gains by exploiting the sparse and block‐banded nature of the precision matrices. Stacking all measurement equations vertically, yields where Υ t and Γ q are ( o q × 1) vectors of observables and intercepts, respectively.…”

“…Moreover, incorporating multiple LS observables draws insights from the heterogeneous evolution of sectorial LSs documented in Alvarez‐Cuadrado, Van Long, and Poschke (), while a factor approach to wages is examined in studies aiming to strengthen the identification of wage markup shocks (Charalampidis ; Galí, Smets, and Wouters ; Justiniano, Primiceri, and Tambalotti ; Lindé, Smets, and Wouters ). In addition, the present data‐driven examination of the LS swings complements branches of the literature that study the implications of models featuring either labor search (Shao and Silos ) or other deviations from Walrasian markets (Boldrin and Horvath ; Gomme and Greenwood ) for the LS via summary statistics from simulations.…”

Unemployment and Gross Domestic Product: Evidence from Papua New Guinea

“…A business cycle labor search model with firm heterogeneity, collateral constraints, and interfirm input credit capital can quantitatively rationalize these facts, and greater financial development is associated with lower usage of input credit capital, greater bank credit, and greater capital accumulation, all of which make firms more resilient in the presence of financial shocks. Charalampidis (2020) studies the recurrent sources of unit-root unemployment fluctuations in Greece, Italy, Portugal, Spain, and the Euro Area by integrating wage markup and labor disutility shocks that exhibit permanent euro-area-wide shifts, country-specific trend developments, and stationary changes in an estimated DSGE model, and in all economies, these labor market shocks account for a negligible share of unemployment cycles, therefore demand shocks explain about 40%of them, contribute to the pre-crisis convergence of unemployment rates, and shape the unemployment spikes during the Great Recession, and cross-country relative price distortions and supply factors account for about 40% and 20% of those cycles, respectively. Gorry et al (2020) illustrate that even with high worker flows between employment and unemployment, slow movements in the composition of workers across groups with different baseline unemployment rates can generate substantial persistence, and when the model is calibrated to match empirical evidence on labor market outcomes that vary with tenure and worker displacement, the model endogenously generates substantial persistence in unemployment.…”