TY  - RPRT
        AU  - Dromel, Nicolas
AU  - Kolakez, Elie
AU  - Lehmann, Etienne
        TI  - Credit Constraints and the Persistence of Unemployment
        PY  - 2009/Oct/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 4501
        UR  - https://www.iza.org/publications/dp4501
        AB  - In this paper, we argue that credit market imperfections impact not only the level of unemployment, but also its persistence. For this purpose, we first develop a theoretical model based on the equilibrium matching framework of Mortensen and Pissarides (1999) and Pissarides (2000) where we introduce credit constraints. We show these credit constraints not only increase steady-state unemployment, but also slow down the transitional dynamics. We then provide an empirical illustration based on a country panel dataset of 20 OECD countries. Our results suggest that credit market imperfections significantly increase the persistence of unemployment.
        KW  - credit constraints
KW  - unemployment
KW  - labor markets
KW  - credit markets
KW  - search frictions
        ER  -