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Labor Market Frictions and Aggregate Employment

Seminar Room A (1st floor JG Smith building)
Tuesday 2nd February 2016 (16:00-17:30)
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Speaker: Mike Elsby (Edinburgh)


‘What is the role of labor market frictions in shaping aggregate employment dynamics? Canonical labor market models share a common theme in exploring the implications of adjustment frictions. We use this shared microeconomic structure to devise an empirical diagnostic that allows one to bound the effects of this class of frictions on the path of aggregate employment. Application of this diagnostic to rich establishment microdata for the United States suggests that canonical labor market frictions are unable to explain the majority of observed employment dynamics. This result can be traced to the failure of canonical models to account for the dynamics of the firm size distribution observed in establishment microdata.

Speaker biography

Mike Elsby's research focuses on the interface between macroeconomics and labour economics, in particular unemployment and wage determination.

Recent work has examined the measurement of labour market flows in developed economies, the modelling of worker and job flows over the business cycle and across firms, the economics of adjustment costs, the role of trend wage growth on long-term increases in joblessness, and the aggregate labour market effects of downward rigidity in wages.

Mike studied economics at the London School of Economics, culminating in a Ph.D. in 2005. Prior to joining the University of Edinburgh, he was an Assistant Professor at the University of Michigan. He is an associate of the Centre for Economic Performance at the LSE.

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