The Dynamic Beveridge Curve

Shigeru Fujita and Garey Ramey

Macroeconomics from EconWPA

Abstract: In aggregate U.S. data, exogenous shocks to labor productivity induce highly persistent and hump-shaped responses to both the vacancy- unemployment ratio and employment. We show that the standard version of the Mortensen-Pissarides matching model fails to replicate this dynamic pattern due to the rapid responses of vacancies. We extend the model by introducing a sunk cost for creating new job positions, motivated by the well-known fact that worker turnover exceeds job turnover. In the matching model with sunk costs, vacancies react sluggishly to shocks, leading to highly realistic dynamics.

Keywords: Unemployment; Vacancies; Labor Adjustment; Matching (search for similar items in EconPapers)
JEL-codes: E32 J63 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2005-09-26
Note: Type of Document - pdf; pages: 43
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http://129.3.20.41/eps/mac/papers/0509/0509026.pdf (application/pdf)

Related works:
Working Paper: The dynamic Beveridge curve (2005)
Working Paper: The Dynamic Beveridge Curve (2005)
Working Paper: The Dynamic Beveridge Curve (2006)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpma:0509026

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