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


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 in 2009. Second, I show that the introduction of reference points can increase significantly unemployment volatility through a mechanism à la Hagerdorn and Manovskii.

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Boitier, V. (2015) The Unemployment Volatility Puzzle: A Note on the Role of Reference Points. Theoretical Economics Letters, 5, 92-96. doi: 10.4236/tel.2015.51013.

Conflicts of Interest

The authors declare no conflicts of interest.


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