Learning on the Job and the Cost of Business Cycles

We show that business cycles reduce welfare through a decrease in the average level of employment labor market search model with learning on job and skill loss during unemployment. Empirically, unemployment job-finding rate are negatively correlated. Since new jobs product these two from transition equation, imply fewer jobs. Learning implies resulting reduces aggregate human capital. This incentives to post vacancies, further decreasing quantify this mechanism find large output costs cycles. (JEL D83, E23, E24, E32, J24, J63)