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Title:Credit constraints and the persistence of unemployment PDF Logo
Authors:Dromel, Nicolas
Kolakez, Elie
Lehmann, Etienne
Issue Date: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:urn:nbn:de:101:1-20091104951
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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