NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Publications by Pascal Michaillat

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

Working Papers and Chapters

January 2014An Economical Business-Cycle Model
with Emmanuel Saez: w19777
In recent decades, advanced economies have experienced low and stable inflation and long periods of liquidity trap. We construct an alternative business-cycle model capturing these two features by adding two assumptions to a money-in-the-utility-function model: the labor market is subject to matching frictions, and real wealth enters the utility function. These assumptions modify the two core equations of the standard New Keynesian model. With matching frictions, we can analyze equilibria in which inflation is fixed and not determined by a forward-looking Phillips curve. With wealth in the utility, the Euler equation is modified and we can obtain steady-state equilibria with a liquidity trap, positive inflation, and labor market slack. The model is simple enough to inspect the mechanisms b...
February 2013Aggregate Demand, Idle Time, and Unemployment
with Emmanuel Saez: w18826
This paper develops a model of unemployment fluctuations. The model keeps the architecture of the general-disequilibrium model of Barro and Grossman [1971] but takes a matching approach to the labor and product markets instead of a disequilibrium approach. On the product and labor markets, both price and tightness adjust to equalize supply and demand. Since there are two variables but only one equilibrium condition on each market, a price mechanism is needed to select an equilibrium. We focus on two polar mechanisms: fixed prices and competitive prices. When prices are fixed, aggregate demand affects unemployment: with a higher aggregate demand, firms find more customers; this reduces the idle time of their employees and thus increases their labor demand; and this reduces unemployment. We ...
November 2010A Macroeconomic Theory of Optimal Unemployment Insurance
with Camille Landais, Emmanuel Saez: w16526
This paper develops a theory of optimal unemployment insurance (UI) that accounts not only for workers’ job-search behavior but also for firms’ hiring behavior. The theoretical framework is a matching model of the labor market in which the production function, wage mechanism, matching function, and utility function are general. The labor market tightness plays a central role in the theory. The tightness is defined as the ratio of job vacancies to aggregate job-search effort and is determined in equilibrium to equalize labor demand and supply. We show that the optimal level of UI is the sum of a conventional Baily-Chetty term, which captures the trade-off between insurance and job-search incentives, and a correction term, which is positive if UI brings labor market tightness closer to its e...

Contact and additional information for this authorAll NBER papers and publicationsNBER Working Papers only

 
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