tightness gap

This paper develops a sufficient-statistic formula for the unemployment gap. The formula depends on the elasticity of the Beveridge curve, cost of unemployment, and recruiting cost. In the United States the unemployment gap is countercyclical and often positive.

This paper explores how the optimal generosity of unemployment insurance varies over the business cycle in the United States. It finds that the optimal replacement rate is countercyclical, just like the actual replacement rate.