More on Unemployment and Vacancy Fluctuations

Dale Mortensen and Éva Nagypál ()

No 1765, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Shimer (2005a) argues that the Mortensen-Pissarides equilibrium search model of unemployment explains only about 10% of the response in the job-finding rate to an aggregate productivity shock. Some of the recent papers inspired by his critique are reviewed and commented on here. Specifically, we suggest that the sole problem is neither the procyclicality of the wage nor the failure to account fully for the opportunity cost of employment. Although an amended version of the model, one that accounts for capital costs and counter cyclic involuntary separations, does much better, it still explains only 40% of the observed volatility of the job-finding rate. Finally, allowing for on-the-job search does not improve the amended model's implications for the amplification of productivity shocks.

Keywords: unemployment and vacancies volatility; job finding rate; labor market search; productivity shocks (search for similar items in EconPapers)
JEL-codes: E24 E32 J41 J63 J64 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2005-09
New Economics Papers: this item is included in nep-dge, nep-lab, nep-ltv and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (45)

Published - published in: Review of Economic Dynamics 2007, 10 (3), 327-347

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Related works:
Journal Article: More on Unemployment and Vacancy Fluctuations (2007)
Working Paper: More on Unemployment and Vacancy Fluctuations (2005)
Working Paper: More on Unemployment and Vacancy Fluctuations (2005)
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