Do Job Destruction Shocks Matter in the Theory of Unemployment?

Melvyn Coles and Ali Moghaddasi Kelishomi

American Economic Journal: Macroeconomics, 2018, vol. 10, issue 3, 118-36

Abstract: Because the data show that market tightness is not orthogonal to unemployment, this paper identifies the many empirical difficulties caused by adopting the free entry of vacancies assumption in the Diamond-Mortensen-Pissarides (DMP) framework. Relaxing the free entry assumption and using Simulated Method of Moments (SMM) finds the vacancy creation process is less than infinitely elastic. Because a recession-leading job separation shock then causes vacancies to fall as unemployment increases, the ad hoc restriction to zero job separation shocks (to generate Beveridge curve dynamics) becomes redundant. In contrast to standard arguments, the calibrated model finds the job separation process drives unemployment volatility over the cycle.

JEL-codes: E24 E32 J24 J63 J64 (search for similar items in EconPapers)
Date: 2018
Note: DOI: 10.1257/mac.20150040
References: Add references at CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
https://www.aeaweb.org/doi/10.1257/mac.20150040 (application/pdf)
https://www.aeaweb.org/articles/attachments?retrie ... 0dpHclQQjbPCc6tONLXF (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... 9scAcUonQxSlEep3cuFp (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: Do Job Destruction Shocks Matter in the Theory of Unemployment? (2015)
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:aea:aejmac:v:10:y:2018:i:3:p:118-36

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Journal: Macroeconomics is currently edited by Simon Gilchrist

More articles in American Economic Journal: Macroeconomics from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().