ABSTRACT: Introducing goods market search frictions into an otherwise standard labor search model provides a simple but attractive framework to jointly analyze the behavior both unemployment and inventories over the business cycle. Behavior of sales and inventories over the business cycle contains information that allows to identify the contribution of technology and preference shocks to fluctuations in unemployment and inventories. I employ Bayesian methods to estimate a model with goods and labor search frictions using U.S. data on labor productivity and inventory-sales ratio, and find that the implied response of vacancies and unemployment to changes in measured labor productivity is about twice as large as in the model with labor search only. Goods market frictions also allow the model to account for the main facts on inventories - procyclical inventory investment, countercyclical inventories-sales ratio, and sales which are more volatile than production. In addition, demand shocks account for about two thirds of uctuations and technology shocks for the remaining one third.
ABSTRACT: I modify the standard real business cycle model by replacing frictionless labor and goods markets with markets where participants have to search for a match before trade can occur. Under the business cycle accounting approach proposed by Chari, Kehoe and McGrattan (2007), goods market frictions manifests themselves as a labor wedge: In an expansion, when consumers benefit from higher availability of goods, smaller disutility from search effort required per unit of consumption good purchased encourages a larger response of the intensive margin of labor supply. This alleviates the issue that arises in the standard labor search model, where labor market frictions act as adjustment costs, and thus result in a labor wedge that resembles a counterfactually procyclical tax on labor income.
ABSTRACT: I use American Time Use Survey data from 2003 to 2016, and document that (1) on state level, average total shopping time decreases with state level unemployment rate and increases with real per capita GDP, and that (2) on individual level total shopping time increases with family income. This is consistent with procyclical overall shopping time. I also examine the behavior of five time use subcategories and show that similar pattern as for total shopping time arises for travel time related to shopping, other shopping and shopping for food. Only for time spent shopping groceries is the effect of higher family income negative.