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Unemployment Equilibrium and On-the-Job Search

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Author Info

  • Burgess, Simon

    ()
    (University of Bristol)

  • Turon, Hélène

    ()
    (University of Bristol)

Abstract

This paper uses the search and matching framework to explore the impact of employed job search on the labour market. The specific features of our model are endogenous employed job search, flows in and out of the labour force, endogenous job destruction and heterogenous job creation. Also, job flows and workers flows do not coincide as we allow for job-to-job flows and labour force entries and exits. Employed job search is shown to have a substantial impact on unemployment dynamics but a negligible one on the level of unemployment. More on-the-job search leads to lower unemployment inflow and outflow, i.e. a more stagnant unemployment pool. With employed job search, the stock of vacancies is more cyclically sensitive, the unemployment outflow less cyclically sensitive and the unemployment inflow more cyclically sensitive than without employed job search. With our model, the impact of a change in unemployment benefit does not only occur through the conventional decrease in the unemployment outflow rate, but also through an increase in the unemployment inflow rate. The calibrated version of our model replicates well the cyclical behaviour of job and worker flows observed in the data.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 753.

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Length: 23 pages
Date of creation: Apr 2003
Date of revision:
Publication status: published as 'Worker Flows, Job Flows and Unemployment in a Matching Model' in: European Economic Review, 2010, 54 (3), 393-408
Handle: RePEc:iza:izadps:dp753

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Related research

Keywords: unemployment; on-the-job search; job destruction; business cycle; matching;

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References

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  1. Garibaldi, Pietro & Wasmer, Etienne, 2001. "Labor Market Flows and Equilibrium Search Unemployment," IZA Discussion Papers 406, Institute for the Study of Labor (IZA).
  2. Burda, Michael C & Wyplosz, Charles, 1993. "Gross Worker and Job Flows in Europe," CEPR Discussion Papers 868, C.E.P.R. Discussion Papers.
  3. Wouter Den Haan & Christian Haefke & Garey Ramey, 2001. "Shocks and Institutions in a Job Matching Model," NBER Working Papers 8463, National Bureau of Economic Research, Inc.
  4. Mortensen, Dale T., 1994. "The cyclical behavior of job and worker flows," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1121-1142, November.
  5. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  6. P Garibaldi, 1995. "Job Flow Dynamics and Firing Restrictions," CEP Discussion Papers dp0256, Centre for Economic Performance, LSE.
  7. Simon Burgess & Julia Lane & David Stevens, 1996. "Job Flows, Worker Flows and Churning," Labor and Demography 9604004, EconWPA.
  8. Burgess, Simon & Turon, Hélène, 2000. "Unemployment Dynamics, Duration and Equilibrium: Evidence from Britain," CEPR Discussion Papers 2490, C.E.P.R. Discussion Papers.
  9. Boeri, Tito, 1999. "Enforcement of employment security regulations, on-the-job search and unemployment duration," European Economic Review, Elsevier, vol. 43(1), pages 65-89, January.
  10. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues 91-5, Federal Reserve Bank of Chicago.
  11. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  12. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-90, October.
  13. Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
  14. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers dp0074, Centre for Economic Performance, LSE.
  15. Burgess, Simon M, 1993. "A Model of Competition between Unemployed and Employed Job Searchers: An Application to the Unemployment Outflow Rate in Britain," Economic Journal, Royal Economic Society, vol. 103(420), pages 1190-204, September.
  16. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers 3548, C.E.P.R. Discussion Papers.
  17. Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
  18. Narendranathan, W & Nickell, S & Stern, J, 1985. "Unemployment Benefits Revisited," Economic Journal, Royal Economic Society, vol. 95(378), pages 307-29, June.
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Citations

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Cited by:
  1. Jukka Petteri Lahtonen & Sanna-Mari Hynninen, 2005. "Does population density matter in the matching process of heterogeneous job seekers and vacancies?," ERSA conference papers ersa05p438, European Regional Science Association.
  2. Abid, Anis Bou & Drine, Imed, 2011. "Efficiency frontier and matching process on the labour market: Evidence from Tunisia," Economic Modelling, Elsevier, vol. 28(3), pages 1131-1139, May.
  3. Hynninen, Sanna-Mari & Longhi, Simonetta, 2009. "Job competition and entry wages of highly educated workers: are there differences between Great Britain and Finland?," ISER Working Paper Series 2009-20, Institute for Social and Economic Research.
  4. Sanna-Mari Hynninen, 2009. "Matching in local labor markets: a stochastic frontier approach," Journal of Productivity Analysis, Springer, vol. 31(1), pages 15-26, February.
  5. Sanna-Mari Hynninen & Aki Kangasharju & Jaakko Pehkonen, 2006. "Regional Matching Frictions and Aggregate Unemployment," ERSA conference papers ersa06p416, European Regional Science Association.
  6. Sanna-Mari Hynninen, 2005. "Labour market status of job seekers in regional matching processes," ERSA conference papers ersa05p499, European Regional Science Association.
  7. Hynninen, Sanna-Mari, 2009. "Is there a wage curve for the highly educated?," ISER Working Paper Series 2009-17, Institute for Social and Economic Research.
  8. Sanna-Mari Hynninen & Jukka Lahtonen, 2007. "Does population density matter in the process of matching heterogeneous job seekers and vacancies?," Empirica, Springer, vol. 34(5), pages 397-410, December.
  9. Elisabetta Marzano, 2008. "Search on the job in European countries: evidence based on the European Community Household Panel Survey (ECHP)," Working Papers 7_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.

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