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Labor Market Matching under Imperfect Information

Tim Willems

No 10-098/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Recent research has shown that the standard labor matching model hasdifficulties in reproducing the co-movement patterns observed in US data. Thisis due to the fact that the standard model lacks sufficient propagation of shocks.This paper shows that refining the informational structure of the model leadsto improvements along this dimension: when agents cannot separately identifypersistent and transitory technology shocks on impact (so that they must solvea signal extraction problem), shocks are propagated. Under this specificationthe standard matching model even manages to make recoveries initially jobless,as in the data.

Keywords: imperfect information; labor market matching; signal extraction; jobless growth (search for similar items in EconPapers)
JEL-codes: D80 E32 J63 J64 (search for similar items in EconPapers)
Date: 2010-09-30, Revised 2011-05-13
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