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Labor Markets and Business Cycles by Robert Shimer

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Preface

The goal of this book is to consolidate, extend, and provide a new perspective on recent research that uses search frictions and wage rigidities to explain the cyclical dynamics of labor markets. Since the working paper versions of Shimer (2005), Hall (2005), and Costain and Reiter (2008) first circulated in 2002 and 2003, there has been a profusion of research in this area, but the underlying question is as old as macroeconomics: why do employment and unemployment fluctuate so much at business cycle frequencies?

Lucas and Rapping’s (1969) theory of intertemporal substitution in labor supply is the starting point for any modern analysis of employment fluctuations, including the Real Business Cycle (RBC) model and the New Keynesian model. ...

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