Advanced Search
MyIDEAS: Login to save this paper or follow this series

Unemployment and endogenous reallocation over the business cycle

Contents:

Author Info

  • Carlos Carrillo-Tudela

    ()

  • Ludo Visschers

    ()

Abstract

We build an analytically and computationally tractable stochastic equilibrium model of unemployment in heterogeneous labor markets. Facing search frictions within markets and reallocation frictions between markets, workers endogenously separate from employment and endogenously reallocate between markets, in response to changing aggregate and local conditions. Empirically, using the 1986-2008 SIPP panels, we document the occupational mobility patterns of the unemployed, finding notably that occupational change of unemployed workers is procyclical. The heterogeneous-market model yields highly volatile countercyclical unemployment, and is simultaneously consistent with procyclical reallocation, countercyclical separations and a negativelysloped Beveridge curve. Moreover, the model exhibits unemployment duration dependence, which (when calibrated to long-term averages) responds realistically to the business cycle, creating substantial longer-term unemployment in downturns. Finally, the model is also consistent with different employment and reallocation outcomes as workers gain experience in the labor market, on average and over the business cycle.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://e-archivo.uc3m.es/bitstream/10016/16197/1/we1302.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we1302.

as in new window
Length:
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:cte:werepe:we1302

Contact details of provider:
Postal: C./ Madrid, 126, 28903 Getafe (Madrid)
Phone: +34-91 6249594
Fax: +34-91 6249329
Email:
Web page: http://www.eco.uc3m.es
More information through EDIRC

Related research

Keywords: Unemployment; Business Cycle; Search; Endogenous Separations; Reallocation; Occupational Mobility;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Guido Menzio & Shouyong Shi, 2008. "Efficient Search on the Job and the Business Cycle," PIER Working Paper Archive 08-029, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  2. Jackman, R & Roper, S, 1987. "Structural Unemployment," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 9-36, February.
  3. Kambourov, Gueorgui & Manovskii, Iourii, 2004. "Occupational Mobility and Wage Inequality," IZA Discussion Papers 1189, Institute for the Study of Labor (IZA).
  4. Philipp Kircher & Leo Kaas, 2013. "Efficient firm dynamics in a frictional labor market," 2013 Meeting Papers, Society for Economic Dynamics 160, Society for Economic Dynamics.
  5. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "Age-Dependent Employment Protection," IZA Discussion Papers 3851, Institute for the Study of Labor (IZA).
  6. Gouge, Randall & King, Ian, 1997. "A Competitive Theory of Employment Dynamics," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(1), pages 1-22, January.
  7. Marcelo Veracierto, 2002. "On the cyclical behavior of employment, unemployment and labor force participation," Working Paper Series, Federal Reserve Bank of Chicago WP-02-12, Federal Reserve Bank of Chicago.
  8. Andri Chassamboulli, 2010. "Labor-market Volatility in a Matching Model with Worker Heterogeneity and Endogenous Separations," University of Cyprus Working Papers in Economics, University of Cyprus Department of Economics 13-2010, University of Cyprus Department of Economics.
  9. Eran Yashiv, 2007. "U.S. Labor Market Dynamics Revisited," CEP Discussion Papers dp0831, Centre for Economic Performance, LSE.
  10. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  11. Ricardo J. Caballero & Mohamad L. Hammour, 1991. "The Cleansing Effect of Recessions," NBER Working Papers 3922, National Bureau of Economic Research, Inc.
  12. Guido Menzio & Shouyong Shi, 2010. "Directed Search on the Job, Heterogeneity, and Aggregate Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 100(2), pages 327-32, May.
  13. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2122, London School of Economics and Political Science, LSE Library.
  14. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
  15. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(2), pages 385-411, April.
  16. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers, Society for Economic Dynamics 460, Society for Economic Dynamics.
  17. Per Krusell & Anthony A. Smith, Jr., . "Income and Wealth Heterogeneity in the Macroeconomy," GSIA Working Papers, Carnegie Mellon University, Tepper School of Business 1997-37, Carnegie Mellon University, Tepper School of Business.
  18. Guido Menzio & Irina A. Telyukova & Ludo Visschers, 2012. "Directed Search over the Life Cycle," PIER Working Paper Archive 12-002, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  19. Lkhagvasuren, Damba, 2012. "Big locational unemployment differences despite high labor mobility," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(8), pages 798-814.
  20. James Costain & Michael Reiter, 2005. "Business Cycles, Unemployment Insurance and the Calibration of Matching Models," Working Papers 215, Barcelona Graduate School of Economics.
  21. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  22. Gary Solon & Ryan Michaels & Michael W. L. Elsby, 2009. "The Ins and Outs of Cyclical Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 84-110, January.
  23. Jeremy Lise & Jean-Marc Robin, 2012. "The Macrodynamics of Sorting between Workers and Firms," 2012 Meeting Papers, Society for Economic Dynamics 1190, Society for Economic Dynamics.
  24. Hamilton, James D, 1988. "A Neoclassical Model of Unemployment and the Business Cycle," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(3), pages 593-617, June.
  25. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 25-49, March.
  26. Jacob Wong, 2012. "Aggregate Reallocation Shocks and the Dynamics of Occupational Mobility and Wage Inequality," School of Economics Working Papers, University of Adelaide, School of Economics 2012-04, University of Adelaide, School of Economics.
  27. Manuel Toledo & Jose I. Silva, 2005. "Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment," 2005 Meeting Papers, Society for Economic Dynamics 775, Society for Economic Dynamics.
  28. Raven E. Saks & Abigail Wozniak, 2007. "Labor reallocation over the business cycle: new evidence from internal migration," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2007-32, Board of Governors of the Federal Reserve System (U.S.).
  29. Shouyong Shi, 2009. "Directed Search for Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, Econometric Society, vol. 77(2), pages 561-584, 03.
  30. Aspen Gorry, 2012. "Experience and Worker Flows," 2012 Meeting Papers, Society for Economic Dynamics 154, Society for Economic Dynamics.
  31. Barlevy, Gadi, 2002. "The Sullying Effect of Recessions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 69(1), pages 65-96, January.
  32. Coles, Melvyn G & Smith, Eric, 1994. "Marketplaces and Matching," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1048, C.E.P.R. Discussion Papers.
  33. Mark Bils & Yongsung Chang & Sun-Bin Kim, 2011. "Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(1), pages 128-54, January.
  34. Shigeru Fujita & Christopher J. Nekarda & Garey Ramey, 2007. "The cyclicality of worker flows: new evidence from the SIPP," Working Papers 07-5, Federal Reserve Bank of Philadelphia.
  35. Eric Sims & Michael Jason Pries, 2011. "Reallocation and the Changing Nature of Economic Fluctuations," 2011 Meeting Papers 1258, Society for Economic Dynamics.
  36. Faberman, R. Jason & Kudlyak, Marianna, 2014. "The Intensity of Job Search and Search Duration," Working Paper, Federal Reserve Bank of Richmond 14-12, Federal Reserve Bank of Richmond.
  37. repec:spo:wpecon:info:hdl:2441/eu4vqp9ompqllr09j003nctkn is not listed on IDEAS
  38. Fernando Alvarez & Marcelo Veracierto, 2000. "Labor-Market Policies in an Equilibrium Search Model," NBER Chapters, in: NBER Macroeconomics Annual 1999, Volume 14, pages 265-316 National Bureau of Economic Research, Inc.
  39. Julen Esteban-Pretel & Junichi Fujimoto, 2011. "Life-Cycle Labor Search with Stochastic Match Quality," CIRJE F-Series, CIRJE, Faculty of Economics, University of Tokyo CIRJE-F-783, CIRJE, Faculty of Economics, University of Tokyo.
  40. Jovanovic, Boyan, 1987. "Work, Rest, and Search: Unemployment, Turnover, and the Cycle," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 5(2), pages 131-48, April.
  41. Robert E. Hall, 2006. "Job Loss, Job Finding and Unemployment in the U.S. Economy over the Past 50 Years," NBER Chapters, in: NBER Macroeconomics Annual 2005, Volume 20, pages 101-166 National Bureau of Economic Research, Inc.
  42. Jean-Marc Robin, 2011. "On the Dynamics of unemployment and wage Distributions," Sciences Po publications info:hdl:2441/eu4vqp9ompq, Sciences Po.
  43. Moscarini, Giuseppe & Thomsson, Kaj, 2006. "Occupational and Job Mobility in the US," Working Papers, Yale University, Department of Economics 19, Yale University, Department of Economics.
  44. Regis Barnichon & Andrew Figura, 2011. "What drives matching efficiency? a tale of composition and dispersion," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2011-10, Board of Governors of the Federal Reserve System (U.S.).
  45. Kevin M. Murphy & Robert H. Topel, 1987. "The Evolution of Unemployment in the United States: 1968 — 1985," NBER Chapters, in: NBER Macroeconomics Annual 1987, Volume 2, pages 11-68 National Bureau of Economic Research, Inc.
  46. Dale T. Mortensen, 2007. "Island Matching," NBER Working Papers 13287, National Bureau of Economic Research, Inc.
  47. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, Elsevier, vol. 7(2), pages 188-209, February.
  48. Gueorgui Kambourov & Iourii Manovskii, 2008. "Rising Occupational And Industry Mobility In The United States: 1968-97," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(1), pages 41-79, 02.
  49. Ebrahimy, Ehsan & Shimer, Robert, 2010. "Stock-flow matching," Journal of Economic Theory, Elsevier, Elsevier, vol. 145(4), pages 1325-1353, July.
  50. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  51. Bhashkar Mazumder, 2007. "New evidence on labor market dynamics over the business cycle," Economic Perspectives, Federal Reserve Bank of Chicago, Federal Reserve Bank of Chicago, issue Q I, pages 36-46.
  52. Damba Lkhagvasuren, 2009. "Large Locational Differences in Unemployment Despite High Labor Mobility: Impact of Moving Cost on Aggregate Unemployment and Welfare," Working Papers, Concordia University, Department of Economics 09009, Concordia University, Department of Economics, revised Mar 2010.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Régis Barnichon & Andrew Figura, 2010. "Labor market heterogeneity and the aggregate matching function," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 1395, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2013.
  2. Bauer, Anja, 2013. "Mismatch unemployment : evidence from Germany 2000-2010," IAB Discussion Paper 201310, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  3. Carrillo-Tudela, Carlos & Hobijn, Bart & Visschers, Ludo, 2014. "Career changes decline during recessions," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco.
  4. Plamen Nenov, 2013. "Regional Mismatch and Labor Reallocation in an Equilibrium Model of Migration," 2013 Meeting Papers, Society for Economic Dynamics 565, Society for Economic Dynamics.
  5. Damba Lkhagvasuren & Roy Nitulescu, 2013. "Sectoral Mobility and Unemployment with Heterogeneous Moving Costs," Journal of Labor Research, Springer, Springer, vol. 34(3), pages 339-358, September.
  6. Jacob Wong, 2012. "Aggregate Reallocation Shocks and the Dynamics of Occupational Mobility and Wage Inequality," School of Economics Working Papers, University of Adelaide, School of Economics 2012-04, University of Adelaide, School of Economics.
  7. Maximiliano Dvorkin, 2013. "Sectoral Shocks, Reallocation and Unemployment in a Model of Competitive Labor Markets," 2013 Meeting Papers, Society for Economic Dynamics 1229, Society for Economic Dynamics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cte:werepe:we1302. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: () The email address of this maintainer does not seem to be valid anymore. Please ask to update the entry or send us the correct address.

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.