Labour markets play a key role in business cycle analysis. Although a focal point of research on unemployment over the past decade, endogenous job destruction has recently fallen into disfavour, since its introduction leads to a positively sloped Beveridge curve. We show that introducing variation in hours per worker - a second margin for labour input adjustment in combination with endogenous job destruction generates a negatively sloped Beveridge curve, a data consistent correlation structure for job flows and captures many aspects of the cyclical behaviour of hours per worker. This improved peformance is robust to wage rigidity (which raises the variability of unemployment and labour market tightness) and a wide range of empirically plausible labour supply elasticities - but not completely inelastic labour supply implicit in much of the literature on labour market search.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
file. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by Edinburgh School of Economics, University of Edinburgh in its series ESE Discussion Papers with number
146.
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.: