Evaluating the Performance of the Search and Matching Model

Eran Yashiv ()

No 1931, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Does the search and matching model fit aggregate U.S. labor market data? While the model has become an important tool of macroeconomic analysis, recent literature pointed to some significant failures in accounting for the data. This paper aims to answer two questions: (i) Does the model fit the data, and, if so, on what dimensions? (ii) Does the data "fit" the model, i.e. what are the data which are relevant to be explained by the model? The analysis shows that the model fits certain specifications of the data on many dimensions, though not on all. This includes capturing the high persistence and high volatility of most of the key variables, the negative co-variation of unemployment and vacancies, and the behavior of the worker job finding rate. A key role in this fit is played by the convexity of hiring costs and the stochastic properties of the separation rate. The latter is a major component of the rate discounting the future value of the job-worker match. The paper offers a workable, empirically-grounded version of the model for the analysis of aggregate U.S. labor market dynamics.

Keywords: labor market flows; vacancies; U.S. labor market; matching; search; business cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J32 J63 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2006-01
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (116)

Published - published in: European Economic Review, 2006, 50 (4), 909-936

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Related works:
Journal Article: Evaluating the performance of the search and matching model (2006)
Working Paper: Evaluating the Performance of the Search and Matching Model (2005)
Working Paper: Evaluating the Performance of the Search and Matching Model (2005)
Working Paper: Evaluating the performance of the search and matching model (2005)
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