What do Information Frictions do?

dc.contributor.author Bhattacharya, Joydeep
dc.contributor.author Chakraborty, Shankha
dc.contributor.department Economics
dc.date 2021-08-10T21:04:45.000
dc.date.accessioned 2021-08-14T04:38:34Z
dc.date.available 2021-08-14T04:38:34Z
dc.date.embargo 2021-08-10
dc.date.issued 2003-01-01
dc.description.abstract <p>Researchers have incorporated labor or credit market frictions in isolation within simple neoclassical models to open up a role for institutions, inject realism into their models and examine the impact of these distortions on output and employment. We present an overlapping generations model with production in which a labor market friction (moral hazard) coexists with a credit market friction (costly state verification). The simultaneous presence and interaction of these two frictions is studied. Our main results are: (i) while credit market frictions affect real activity and employment both in the short and long run, labor market frictions typically have only short-run effects unless they also affect the volume of investment per worker, (ii) the two frictions amplify each other to produce higher longrun unemployment than would result from only labor market frictions, (iii) these distortions have the ability to prolong the effect of temporary shocks, and (iv) the dynamical properties of economies with both frictions are, somewhat surprisingly, qualitatively similar to their frictionless counterparts.</p>
dc.format.mimetype application/pdf
dc.identifier archive/lib.dr.iastate.edu/econ_las_workingpapers/266/
dc.identifier.articleid 1265
dc.identifier.contextkey 24267801
dc.identifier.s3bucket isulib-bepress-aws-west
dc.identifier.submissionpath econ_las_workingpapers/266
dc.identifier.uri https://dr.lib.iastate.edu/handle/20.500.12876/Dw88a95w
dc.source.bitstream archive/lib.dr.iastate.edu/econ_las_workingpapers/266/2003_Bhattacharya_WhatInformationWP.pdf|||Fri Jan 14 23:03:38 UTC 2022
dc.subject.disciplines Growth and Development
dc.subject.disciplines Labor Economics
dc.subject.disciplines Macroeconomics
dc.subject.keywords moral hazard
dc.subject.keywords costly state verification
dc.subject.keywords contracts
dc.subject.keywords dynamics
dc.subject.keywords growth models
dc.title What do Information Frictions do?
dc.type article
dc.type.genre working_paper
dspace.entity.type Publication
relation.isAuthorOfPublication 56f37f39-ec2a-4b0b-b491-e32fba8e2c73
relation.isOrgUnitOfPublication 4c5aa914-a84a-4951-ab5f-3f60f4b65b3d
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