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Mismatch

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  • Robert Shimer

Abstract

This paper develops a dynamic model of mismatch. Workers and jobs are randomly allocated to labor markets. Each market clears, but some have excess (unemployed) workers and some have excess (vacant) jobs. As workers and jobs switch markets, unemployed workers find vacancies and employed workers become unemployed. The model is quantitatively consistent with the business cycle frequency comovement of unemployment, vacancies, and the job finding rate and explains much of these variables' volatility. It can also address cyclicality in the separation rate into unemployment and duration dependence in the job finding rate. The results are robust to some nonrandom mobility. (JEL E24, J41, J63, J64)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 4 (September)
Pages: 1074-1101

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1074-1101

Note: DOI: 10.1257/aer.97.4.1074
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  1. DREZE, Jacques & BEAN, Charles, 1990. "Europe's employment problem: Introduction and synthesis," CORE Discussion Papers 1990041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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Cited by:
  1. Raven E. Saks & Abigail Wozniak, 2007. "Labor reallocation over the business cycle: new evidence from internal migration," Finance and Economics Discussion Series 2007-32, Board of Governors of the Federal Reserve System (U.S.).
  2. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute for the Study of Labor (IZA).
  3. Jonathan F. Pingle, 2006. "The relocation decisions of working couples," Finance and Economics Discussion Series 2006-33, Board of Governors of the Federal Reserve System (U.S.).

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