Understanding Labour Market Frictions: A Tobin’s Q Approach

Parantap Basu

CDMA Conference Paper Series from Centre for Dynamic Macroeconomic Analysis

Abstract: Labour market friction is viewed as the Tobin’s Q of an employed worker as opposed to the position of the Beveridge curve. This Tobin’s Q is inversely proportional to the average quality of the match between employers and workers. Based on this measure, I find that the labour market friction behaves procyclically in the US, which is indicative of the fact that firms compromise on the quality of the skill match during an expansion.

Date: 2006-09
New Economics Papers: this item is included in nep-lab and nep-mac
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