On This Page
A quarterly journal of in-depth articles reporting on the Bank's economic research.
Last Updated: 08/04/15

Economic Perspectives

Second Quarter 2015 Edition

A Simple Model of Gross Worker Flows across Labor Market States

Marcelo Veracierto

The author develops a simple model of the gross flows of workers across labor market states that is based on Krusell et al. (2012). Its simplicity allows for analytical derivations that make the determination of these flows transparent. Moreover, he finds that if errors in the classification of agents’ labor market states are introduced and allowed to vary over time, the model has the ability to generate business cycle dynamics similar to those observed in the U.S. data. However, its dynamics are driven essentially by exogenous factors, not endogenous ones.