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Job Matching and Propagation

Garey Ramey and Shigeru Fujita

University of California at San Diego, Economics Working Paper Series from Department of Economics, UC San Diego

Abstract: In the U.S. labor maarket, the vacancy-unemployment ratio and unemployment react sluggishly to productivity shocks. We show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses. Extending the model to incorprate sunk costs for vacancy creation yields highly realistic dynamics. Creation costs induce entrant firms to smooth the adjustment of new openings following a shock, leading the stock of vacancies to react sluggishly.

Keywords: unemployment; vacancies; labor adjustment; matching (search for similar items in EconPapers)
Date: 2006-07-10
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Journal Article: Job matching and propagation (2007) Downloads
Working Paper: Job matching and propagation (2006) Downloads
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