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New Evidence, Old Puzzles: Technology Shocks and Labor Market Dynamics

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  • Almut Balleer

Abstract

Can the standard search-and-matching labor market model replicate the business cycle fluctuations of the job finding rate and the unemployment rate? In the model, fluctuations are prominently driven by productivity shocks which are commonly interpreted as technology shocks. I estimate different types of technology shocks from structural VARs and reassess the empirical performance of the standard model based on second moments that are conditional on technology shocks. Most prominently, the model replicates the conditional volatility of job finding and unemployment, so that the Shimer critique does not apply. Instead the model lacks non-technological disturbances to replicate the overall sample volatility. In addition, positive technology shocks lead to a fall in job finding and an increase in unemployment thereby opposing the dynamics in the standard model similar to the “hours puzzle” in Galí (1999)

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1500.

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Length: 49 pages
Date of creation: Mar 2009
Date of revision:
Handle: RePEc:kie:kieliw:1500

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Keywords: labor market dynamics; technology shocks; structural VAR; search and matching; business cycle;

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Citations

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Cited by:
  1. Björn van Roye & Dennis Wesselbaum, 2009. "Capital, Endogenous Separations, and the Business Cycle," Kiel Working Papers 1561, Kiel Institute for the World Economy.
  2. Wesselbaum, Dennis, 2009. "Firing Tax vs. Severance Payment - An Unequal Comparison," MPRA Paper 17637, University Library of Munich, Germany.
  3. Poilly, Céline & Wesselbaum, Dennis, 2014. "Evaluating labor market reforms: A normative analysis," Journal of Macroeconomics, Elsevier, Elsevier, vol. 39(PA), pages 156-170.
  4. Kónya, István & Jakab M., Zoltán, 2012. "Munkapiaci súrlódások DSGE modellekben
    [Labour market frictions in DSGE models]
    ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(9), pages 933-962.
  5. Lechthaler, Wolfgang & Merkl, Christian & Snower, Dennis J., 2010. "Monetary persistence and the labor market: A new perspective," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(5), pages 968-983, May.
  6. Nordmeier, Daniela & Weber, Enzo, 2013. "Conditional Patterns of Unemployment Dynamics in Germany," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79958, Verein für Socialpolitik / German Economic Association.
  7. Dennis Wesselbaum, 2009. "Firing Costs in a New Keynesian Model with Endogenous Separations," Kiel Working Papers 1550, Kiel Institute for the World Economy.
  8. Alessia Campolmi & Stefano Gnocchi, 2011. "Labor Market Participation, Unemployment and Monetary Policy," MNB Working Papers, Magyar Nemzeti Bank (the central bank of Hungary) 2011/4, Magyar Nemzeti Bank (the central bank of Hungary).
  9. Nordmeier, Daniela & Weber, Enzo, 2013. "Patterns of unemployment dynamics in Germany," IAB Discussion Paper 201302, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  10. Steffen Ahrens & Dennis Wesselbaum, 2009. "On the Introduction of Firing Costs," Kiel Working Papers 1559, Kiel Institute for the World Economy.

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