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CEP discussion paper
Resurrecting the Participation Margin
Monique Ebell
June 2008
Paper No' CEPDP0873:
Full Paper (pdf)

JEL Classification: E24; E32; J21; J64

Tags: unemployment; business cycles; labor force participation

This paper considers a real business cycle model with search frictions in the labor market and labor supply which is elastic along the participation margin. Previous authors have found that such models generate counterfactually procyclical unemployment and a positively-sloped Beveridge curve. This paper presents a calibrated model which succeeds at generating countercyclical unemployment and a negatively-sloped Beveridge curve despite the presence of a participation margin.