The Unemployment Volatility Puzzle: a Note on the Role of Reference Points

Vincent Boitier (1, 2)

1 CES - Centre d'économie de la Sorbonne
2 GAINS - Groupe d'Analyse des Itinéraires et des Niveaux Salariaux

This theoretical note aims at studying the role of reference points in generating unemployment volatility. For this purpose, I introduce the notion of reference points in a standard Mortensen-Pissarides model. I obtain two results. First, I find that the obtained model is similar to the one found by Pissarides (2009) with matching costs. Second, I show that the introduction of reference points can increase significantly unemployment volatility through a mechanism à la Hagerdorn and Manovskii (2008).

Mots clés: Reference points; Job matching; Unemployment volatility

Domaines: Economies et finances

Vincent Boitier. The Unemployment Volatility Puzzle: a Note on the Role of Reference Points. Theoretical Economics Letters, 2015, 05 (01), pp.92-96. ⟨10.4236/tel.[phone]⟩. ⟨hal-00878107v2⟩