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Evaluating the Performance of the Search and Matching Model

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  • Eran Yashiv

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 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 does fit 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, as well as the negative co-variation of unemployment and vacancies. It offers a workable, empirically-grounded version of the model for the analysis of aggregate U.S. labor market dynamics. The paper provides macroeconomists guidance concerning the relevant "building block" for modelling the labor market, both in terms of the model and in terms of the data.

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Bibliographic Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0677.

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Date of creation: Feb 2005
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Handle: RePEc:cep:cepdps:dp0677

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: search; matching; U.S. labor market; vacancies; labor market flows; business cycles.;

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References

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  1. Eran Yashiv, 2005. "Evaluating the performance of the search and matching model," LSE Research Online Documents on Economics 19906, London School of Economics and Political Science, LSE Library.
  2. Katharine G. Abraham, 1987. "Help-Wanted Advertising, Job Vacancies, and Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 18(1), pages 207-248.
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  6. Eran Yashiv, 2005. "Forward-Looking Hiring Behavior and the Dynamics of the Aggregate Labor Market," 2005 Meeting Papers 360, Society for Economic Dynamics.
  7. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
  8. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
  9. Eran Yashiv, 2000. "The Determinants of Equilibrium Unemployment," American Economic Review, American Economic Association, vol. 90(5), pages 1297-1322, December.
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  11. Yashiv, Eran, 2004. "Macroeconomic policy lessons of labor market frictions," European Economic Review, Elsevier, vol. 48(2), pages 259-284, April.
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  24. Dale T. Mortensen, 1978. "Specific Capital, Bargaining, and Labor Turnover," Discussion Papers 320, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  28. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
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  30. Cahuc, Pierre & Marque, Fran├žois & Wasmer, Etienne, 2004. "A Theory of Wages and Labour Demand with Intra-firm Bargaining and Matching Frictions," CEPR Discussion Papers 4605, C.E.P.R. Discussion Papers.
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  41. repec:fth:prinin:413 is not listed on IDEAS
  42. Abowd, John M & Zellner, Arnold, 1985. "Estimating Gross Labor-Force Flows," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 254-83, June.
  43. Yashiv, Eran, 2005. "Evaluating the Performance of the Search and Matching Model," CEPR Discussion Papers 5363, C.E.P.R. Discussion Papers.
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