High Discounts and Low Fundamental Surplus: An Equivalence Result for Fluctuations

• 成果类型: Article; Early Access
• 署名作者: Mitra, Indrajit; Seo, Taeuk; Xu, Yu
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - Atlanta; University of Michigan System; University of Michigan; University of Delaware
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2022.03712
• 发表日期: 2023
• 关键词: equivalence result; fundamental surplus; unemployment fluctuations; time varying risk premia; Model Misspecification

摘要

We establish an observational equivalence between unemployment fluctuations of the Diamond-Mortensen-Pissarides search economy augmented with time varying risk premia and an otherwise identical economy without risk premia but with a time varying value of leisure. This equivalence holds for general risk premia processes and allows us to view the effects of different models of risk premia as operating through a single channel- one that alters the value of leisure. We derive simple expressions for semielasticities of labor market tightness with respect to productivity and risk premium shocks. We show wages can be used to detect misspecification in the discount rate process used in hiring decisions.