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Worker search effort as an amplification mechanism

Paul Gomme () and Damba Lkhagvasuren

Journal of Monetary Economics, 2015, vol. 75, issue C, 106-122

Abstract: It is well known that the Diamond–Mortensen–Pissarides model exhibits a strong trade-off between cyclical unemployment fluctuations and the size of rents to employment. Introducing endogenous job search effort reduces the strength of the trade-off while bringing the model closer to the data. Ignoring worker search effort leads to a large upward bias in the elasticity of matches with respect to vacancies. Merging the American Time Use Survey and the Current Population Survey, new evidence in support of procyclical search effort is presented. Average search effort of the unemployed is subject to cyclical composition biases.

Keywords: Variable search effort; Unemployment and vacancies; Beveridge curve; Search intensity; Time use (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:eee:moneco:v:75:y:2015:i:c:p:106-122