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The dynamic Beveridge curve

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  • Shigeru Fujita
  • Garey Ramey

Abstract

In aggregate U.S. data, exogenous shocks to labor productivity induce highly persistent and hump-shaped responses to both the vacancy-unemployment ratio and employment. The authors show that the standard version of the Mortensen-Pissarides matching model fails to replicate this dynamic pattern due to the rapid responses of vacancies. They extend the model by introducing a sunk cost for creating new job positions, motivated by the well-known fact that worker turnover exceeds job turnover. In the matching model with sunk costs, vacancies react sluggishly to shocks, leading to highly realistic dynamics

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 05-22.

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Date of creation: 2005
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Handle: RePEc:fip:fedpwp:05-22

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Keywords: Employment ; Unemployment;

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  9. Silva, José Ignacio & Toledo, Manuel, 2009. "Labor Turnover Costs And The Cyclical Behavior Of Vacancies And Unemployment," Macroeconomic Dynamics, Cambridge University Press, Cambridge University Press, vol. 13(S1), pages 76-96, May.
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  17. Oliver Jean Blanchard & Peter Diamond, 1990. "The Cyclical Behovior of the Gross Flows of U.S. Workers," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, Economic Studies Program, The Brookings Institution, vol. 21(2), pages 85-156.
  18. R. Jason Faberman, 2004. "Gross Job Flows over the Past Two Business Cycles: Not all 'Recoveries' are Created Equal," Working Papers, U.S. Bureau of Labor Statistics 372, U.S. Bureau of Labor Statistics.
  19. Jackman, R & Layard, Richard & Pissarides, C, 1989. "On Vacancies," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, Department of Economics, University of Oxford, vol. 51(4), pages 377-94, November.
  20. Eran Yashiv, 2005. "Forward-Looking Hiring Behavior and the Dynamics of the Aggregate Labor Market," 2005 Meeting Papers, Society for Economic Dynamics 360, Society for Economic Dynamics.
  21. Shigeru Fujita, 2004. "Vacancy persistence," Working Papers, Federal Reserve Bank of Philadelphia 04-23, Federal Reserve Bank of Philadelphia.
  22. Hoyt Bleakley & Jeffrey C. Fuhrer, 1997. "Shifts in the Beveridge Curve, job matching, and labor market dynamics," New England Economic Review, Federal Reserve Bank of Boston, Federal Reserve Bank of Boston, issue Sep, pages 3-19.
  23. 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.
  24. Harold L. Cole & Richard Rogerson, 1996. "Can the Mortonson-Pissarides matching model match the business cycle facts?," Staff Report, Federal Reserve Bank of Minneapolis 224, Federal Reserve Bank of Minneapolis.
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