Japan's Labor Market Cyclicality and the Volatility Puzzle

Julen Esteban-Pretel, Ryo Nakajima and Ryuichi Tanaka

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: The search and matching model has recently come under criticism for its inability to account for some of the cyclical properties of the U.S. labor market. Shimer (2005) has shown that the basic version of the model is incapable of reproducing the volatility of the market tightness for reasonable movements in productivity. This paper considers whether the so-called "Shimer Puzzle" also holds for the Japanese economy. We present empirical evidence on the cyclical properties of the labor market variables in Japan and compare these to their U.S. counterparts. We then build, parametrize, and simulate three different versions of the search and matching model (with exogenous job destruction, with endogenous job destruction, and embedded in a Real Business Cycle model) and compare the simulated statistics to the data. We find that the "Shimer Puzzle" does hold for Japan, since the model is unable to generate as much volatility on the market tightness as in the data.

Pages: 30 pages
Date: 2011-04
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Downloads: (external link)
https://www.rieti.go.jp/jp/publications/dp/11e040.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:11040

Access Statistics for this paper

More papers in Discussion papers from Research Institute of Economy, Trade and Industry (RIETI) Contact information at EDIRC.
Bibliographic data for series maintained by TANIMOTO, Toko ().