Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/36120
Authors: 
Dromel, Nicolas
Kolakez, Elie
Lehmann, Etienne
Year of Publication: 
2009
Series/Report no.: 
IZA Discussion Papers 4501
Abstract: 
In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 20 OECD countries. Our results suggest that credit market imperfections significantly increase the persistence of unemployment.
Subjects: 
Credit markets
labor markets
unemployment
credit constraints
search frictions
JEL: 
E24
E44
J08
J64
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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