Hiring Freeze and Bankruptcy in Unemployment Dynamics
AbstractThis paper proposes a matching model that distinguishes between job creation by existing firms and job creation by firm entrants. The paper argues that vacancy posting and job destruction on the extensive margin, i.e. from firms that enter and exit the labour market, represents a viable mechanism for understanding the cyclical properties of vacancies and unemployment. The model features both hiring freeze and bankruptcies, where the former represents a sudden shut down of vacancy posting at the firm level with labour downsizing governed by natural turnover. A bankrupt firm, conversely, shut down its vacancies and lay offs its stock of workers. Recent research in macroeconomics has shown that a calibration of the Mortensen and Pissarides matching model account for 10 percent of the cyclical variability of the vacancy unemployment ratio displayed by U.S. data. A calibration of the model that explicitly considers hiring freeze and bankruptcy can account for 20 to 35 percent of the variability displayed by the data.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2263.
Length: 32 pages
Date of creation: Aug 2006
Date of revision:
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Other versions of this item:
- Pietro Garibaldi, 2006. "Hiring Freeze and Bankruptcy in Unemployment Dynamics," Carlo Alberto Notebooks, Collegio Carlo Alberto 7, Collegio Carlo Alberto.
- Garibaldi, Pietro, 2006. "Hiring Freeze and Bankruptcy in Unemployment Dynamics," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5835, C.E.P.R. Discussion Papers.
- Pietro Garibaldi, 2006. "Hiring Freeze and Bankruptcy in Unemployment Dynamics," 2006 Meeting Papers, Society for Economic Dynamics 227, Society for Economic Dynamics.
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-16 (All new papers)
- NEP-DGE-2006-09-16 (Dynamic General Equilibrium)
- NEP-ENT-2006-09-16 (Entrepreneurship)
- NEP-LAB-2006-09-16 (Labour Economics)
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.:
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[Introduction to the study of matching models of unemployment]," MPRA Paper 22735, University Library of Munich, Germany.
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