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Self-Stabilizing Firms and Unemployment Persistence

Choudhary, A and Levine, P Self-Stabilizing Firms and Unemployment Persistence .

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The question of why the unemployment rate takes a long time before it reverts back to its natural-rate following a negative exogenous shock has been the subject of unremitting interest in macroeconomics. This paper shows that the speed of adjustment to the steady-state unemployment and the degree of risk-aversion in firms are positively related. The reason is that risk-aversion in firms creates a self-adjusting mechanism whereby cautious firms try to vigorously regain the pre-shock employment levels in an attempt to minimize fluctuations in profits.

Item Type: Other
Divisions : Surrey research (other units)
Authors :
Choudhary, A
Uncontrolled Keywords : E24, E27, Unemployment, Persistence, Risk-Aversion.
Depositing User : Symplectic Elements
Date Deposited : 16 May 2017 15:14
Last Modified : 23 Jan 2020 10:24

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