Data and Code for: Learning on the Job and the Cost of Business Cycles

Principal Investigator(s): View help for Principal Investigator(s) Karl Walentin, Sveriges Riksbank; Andreas Westermark, Sveriges Riksbank

Version: View help for Version V1

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Data and Code for: Learning on the Job and the Cost of Business Cycles		0

Project Citation:

Walentin, Karl, and Westermark, Andreas . Data and Code for: Learning on the Job and the Cost of Business Cycles. Nashville, TN: American Economic Association [publisher], 2022. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2022-09-30. https://doi.org/10.3886/E135081V1

Project Description

Summary: We show that business cycles reduce welfare through a decrease in the average level of employment in a labor market search model with learning on-the-job and skill loss during unemployment. Empirically, unemployment and the job finding rate are negatively correlated. Since new jobs are the product of these two from the employment transition equation, business cycles imply fewer news jobs. Learning on-the-job implies that the resulting decrease in employment reduces aggregate human capital. This reduces incentives to post vacancies, further decreasing employment and human capital. We quantify this mechanism and find large output and welfare costs of business cycles.

Scope of Project

Subject Terms: Labor market

JEL Classification:
E32 Business Fluctuations; Cycles
J64 Unemployment: Models, Duration, Incidence, and Job Search

Geographic Coverage: U.S.

Universe: Adult humans

Data Type(s): aggregate data

Collection Notes: All data sets used are publicly available with the exception of job finding rate data provided by Shigeru Fujita. This dataset is is generated using Current Population Survey data, which are publicly available.

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V1 [2022-09-30]

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