scholarly journals Endogenous Separations, Wage Rigidities, and Unemployment Volatility

2022 ◽  
Vol 14 (1) ◽  
pp. 332-354
Author(s):  
Mikael Carlsson ◽  
Andreas Westermark
Keyword(s):  
Wage Rigidity ◽  
Empirical Literature ◽  
Search And Matching ◽  
Matching Model ◽  
Sufficient Statistic ◽  
Search And Matching Model ◽  
Unemployment Volatility ◽  
Newly Hired ◽  
New Hires ◽  
Relevant Degree

We show that in microdata, as well as in a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations and unemployment volatility. Allowing for an empirically relevant degree of wage rigidities for incumbent workers drives unemployment volatility as well as the volatility of vacancies and tightness to that in the data. Thus, the degree of wage rigidity for newly hired workers is not a sufficient statistic for determining the effect of wage rigidities on macroeconomic outcomes. This finding affects the interpretation of a large empirical literature on wage rigidities. (JEL E24, J23, J31, J41, J63)

scholarly journals A NOTE ON THE RELATION BETWEEN SEARCH COSTS AND SEARCH DURATION FOR NEW HIRES

2020 ◽  
pp. 1-14 ◽  
Author(s):  
Francesco Carbonero ◽  
Hermann Gartner
Keyword(s):  
Labor Market ◽  
Instrumental Variable ◽  
Search Costs ◽  
Market Volatility ◽  
Fixed Costs ◽  
Search And Matching ◽  
Matching Model ◽  
Instrumental Variable Estimation ◽  
Search And Matching Model ◽  
New Hires

Fixed search costs, that is, costs that do not vary with search duration, can amplify the cyclical volatility of the labor market. To assess the size of fixed costs, we analyze the relation between search costs and search duration using German establishment data. An instrumental variable estimation shows no relation between search duration and search costs. We conclude that search costs are mainly fixed costs. Furthermore, we show that a search and matching model, calibrated for Germany with fixed costs close to 75%, can generate labor market volatility that is consistent with the data.

scholarly journals Do Matching Frictions Explain Unemployment? Not in Bad Times

2012 ◽  
Vol 102 (4) ◽  
pp. 1721-1750 ◽  
Author(s):  
Pascal Michaillat
Keyword(s):  
Labor Market ◽  
Economic Equilibrium ◽  
Wage Rigidity ◽  
Search And Matching ◽  
Matching Model ◽  
Cyclical Fluctuations ◽  
Matching Frictions ◽  
Search And Matching Model ◽  
Marginal Returns

This paper proposes a search-and-matching model of unemployment in which jobs are rationed: the labor market does not clear in the absence of matching frictions. This job shortage arises in an economic equilibrium from the combination of some wage rigidity and diminishing marginal returns to labor. In recessions, job rationing is acute, driving the rise in unemployment, whereas matching frictions contribute little to unemployment. Intuitively in recessions, jobs are lacking, the labor market is slack, and recruiting is easy and inexpensive, so matching frictions do not matter much. In a calibrated model, cyclical fluctuations in the composition of unemployment are large.

scholarly journals THE CYCLICAL BEHAVIOR OF UNEMPLOYMENT AND VACANCIES WITH LOSS OF SKILLS DURING UNEMPLOYMENT

2016 ◽  
Vol 21 (6) ◽  
pp. 1277-1304 ◽  
Author(s):  
Victor Ortego-Marti
Keyword(s):  
Human Capital ◽  
Aggregate Productivity ◽  
Search And Matching ◽  
Matching Model ◽  
Cyclical Fluctuations ◽  
Search And Matching Model ◽  
Cyclical Behavior

This paper studies the cyclical fluctuations in unemployment and vacancies in a search and matching model in which workers lose skills during periods of unemployment. Firms' profits fluctuate more because aggregate productivity affects the economy's average human capital. Moreover, wages for workers with lower levels of human capital are closer to the value of nonmarket time, leading to more rigid wages. Fluctuations in the vacancy--unemployment ratio are larger than those in the baseline search and matching model and similar to those we observe in the data.

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