The Dynamic Beveridge Curve
Shigeru Fujita and
University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego
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)
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Working Paper: The Dynamic Beveridge Curve (2006)
Working Paper: The dynamic Beveridge curve (2005)
Working Paper: The Dynamic Beveridge Curve (2005)
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