Journal Article

The Sullying Effect of Recessions

Gadi Barlevy

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 69, issue 1, pages 65-96
Published in print January 2002 | ISSN: 0034-6527
Published online January 2002 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/1467-937X.00198
The Sullying Effect of Recessions

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Previous work has established that recessions involve a “cleansing” effect, so that in downturns, only high productivity jobs remain. But empirical evidence suggests job quality is procyclical: jobs created in recessions are likely to be low-paying and temporary. This paper modifies previous models by adding on-the-job search, which leads to an additional “sullying” effect. Calibration of the model suggests this offsetting sullying effect is likely to be much larger than the cleansing effect, and can account for the procyclical match quality we observe in the data.

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Subjects: Economics

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