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Exogenous versus Endogenous Separation

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  • Shigeru Fujita
  • Garey Ramey

Abstract

This paper assesses how various approaches to modeling the separation margin affect the quantitative ability of the Mortensen-Pissarides labor matching model. The model with a constant separation rate fails to produce realistic volatility and productivity responsiveness of the separation rate and worker flows. The specification with endogenous separation succeeds along these dimensions. Allowing for on-the-job search enables the model to replicate the Beveridge curve. All specifications, however, fail to generate sufficient volatility of the job finding rate. While adopting the Hagedorn-Manovskii calibration remedies this problem, the volume of job-to-job transitions in the on-the-job search specification becomes essentially zero. (JEL E24, J41, J64)

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Bibliographic Info

Article provided by American Economic Association in its journal American Economic Journal: Macroeconomics.

Volume (Year): 4 (2012)
Issue (Month): 4 (October)
Pages: 68-93

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Handle: RePEc:aea:aejmac:v:4:y:2012:i:4:p:68-93

Note: DOI: 10.1257/mac.4.4.68
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Cited by:
  1. Lin, Ching-Yang & Miyamoto, Hiroaki, 2014. "An estimated search and matching model of the Japanese labor market," Journal of the Japanese and International Economies, Elsevier, vol. 32(C), pages 86-104.
  2. Hairault, Jean-Olivier & Langot, François & Sopraseuth, Thepthida, 2014. "Why is Old Workers' Labor Market More Volatile? Unemployment Fluctuations over the Life-Cycle," IZA Discussion Papers 8076, Institute for the Study of Labor (IZA).
  3. Ching-Yang Lin & Hiroaki Miyamoto, 2013. "Estimating a Search and Matching Model of the Ag-gregate Labor Market in Japan," Working Papers EMS_2013_09, Research Institute, International University of Japan.
  4. repec:hal:cesptp:halshs-00972291 is not listed on IDEAS

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