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Search, shirking and labor market volatility

Christopher Martin and Bingsong Wang

Journal of Macroeconomics, 2020, vol. 66, issue C

Abstract: This paper proposes a modified version of the standard search and matching model of the labour market that includes a shirking mechanism. We show that our model delivers a close match to the simulated volatilities, correlations and autocorrelations of unemployment, vacancies, labour market tightness and the job finding rate with values observed in US data. In doing so, it outperforms prominent alternative models. Our model also has novel policy implications for the impact of income taxes, subsidies on hiring and employment taxes on unemployment and its volatility.

Keywords: Search frictions; Shirking; Unemployment volatility puzzle (search for similar items in EconPapers)
JEL-codes: E23 E32 J23 J30 J64 (search for similar items in EconPapers)
Date: 2020
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Working Paper: Search, Shirking and Labor Market Volatility (2016) Downloads
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DOI: 10.1016/j.jmacro.2020.103243

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