Aggregation in Economies with Search Frictions

Nikolaos Kokonas, Paulo Santos Monteiro

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We derive an aggregation result in economies with indivisible labor supply choices and frictional labor markets, obtaining a tractable model of gross worker flows in aggregate labor markets with search frictions. Our result explores the fact that economies with non-convex choice sets and idiosyncratic shocks allow for sunspot equilibria a la Kehoe et al. (2002). We use comparative steady state analysis to demonstrate the applicability of our aggregation result. Our framework reconciles the neoclassical growth model with search frictions with a mildly procyclical participation rate and matches the gross worker flows underpinning those dynamics.
Original languageEnglish
Article number102521
Number of pages11
JournalJournal of Mathematical Economics
Early online date30 Apr 2021
Publication statusPublished - 1 Oct 2021

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© 2021 Elsevier B.V. This is an author-produced version of the published paper. Uploaded in accordance with the publisher’s self-archiving policy.


  • indivisibilities
  • sunspots
  • search frictions
  • gross worker flows

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