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On the Dynamics of unemployment and wage Distributions

Author

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  • Jean-Marc Robin

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract

Postel-Vinay and Robin's (2002) sequential auction model is extended to allow for aggregate productivity shocks. Workers exhibit permanent differences in ability while firms are identical. Negative aggregate productivity shocks induce job destruction by driving the surplus of matches with low ability workers to negative values. Endogenous job destruction coupled with worker heterogeneity thus provides a mechanism for amplifying productivity shocks that offers an original solution to the unemployment volatility puzzle (Shimer (2005)). Moreover, positive or negative shocks may lead employers and employees to renegotiate low wages up and high wages down when agents' individual surpluses become negative. The model delivers rich business cycle dynamics of wage distributions and explains why both low wages and high wages are more procyclical than wages in the middle of the distribution.

Suggested Citation

  • Jean-Marc Robin, 2011. "On the Dynamics of unemployment and wage Distributions," SciencePo Working papers Main hal-01024463, HAL.
    • Handle: RePEc:hal:spmain:hal-01024463
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01024463
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    Citations

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    Cited by:

    1. Schulz, Bastian, 2024. "Labor market dynamics with sorting," Journal of Economic Dynamics and Control, Elsevier, vol. 158(C).
    2. Murtin, Fabrice & Robin, Jean-Marc, 2018. "Labor market reforms and unemployment dynamics," Labour Economics, Elsevier, vol. 50(C), pages 3-19.
    3. Kandoussi, Malak & Langot, François, 2022. "Uncertainty shocks and unemployment dynamics," Economics Letters, Elsevier, vol. 219(C).
    4. Jesper Bagger & Francois Fontaine & Fabien Postel-Vinay & Jean-Marc Robin, 2014. "Tenure, Experience, Human Capital, and Wages," SciencePo Working papers Main hal-01301431, HAL.
    5. Giuseppe Moscarini & Fabien Postel-Vinay, 2016. "Wage Posting and Business Cycles: a Quantitative Exploration," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 135-160, January.
    6. repec:hal:spmain:info:hdl:2441/42tkpm5t7862r5ipdeiq2voou is not listed on IDEAS
    7. Etienne Lale, 2022. "Search and Multiple Jobholding," Working Papers 22-07, Chair in macroeconomics and forecasting, University of Quebec in Montreal's School of Management.
    8. repec:hal:spmain:info:hdl:2441/1avjr94u1u9dkqrhs6u825vpp4 is not listed on IDEAS
    9. repec:hal:spmain:info:hdl:2441/5taek6gt3k8m0r69e1j1ombcc5 is not listed on IDEAS

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