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Implications of Search Frictions: Matching Aggregate and Establishment-level Observations

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  • Russell Cooper
  • John Haltiwanger
  • Jonathan L. Willis

Abstract

This paper studies hours, employment, vacancies and unemployment at micro and macro levels. It is built around a set of facts concerning the variability of unemployment and vacancies in the aggregate and, at the establishment level, the distribution of net employment growth and the comovement of hours and employment growth. A search model with frictions in hiring and firing is used as a framework to understand these observations. Notable features of this search model include non-convex costs of posting vacancies, establishment level profitability shocks and a contracting framework that determines the response of hours and wages to shocks. The search friction creates an endogenous, cyclical adjustment cost. We specify and estimate the parameters of the search model using simulated method of moments to match establishment-level and aggregate observations. The estimated search model is able to capture both the aggregate and establishment-level facts.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13115.

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Date of creation: May 2007
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Handle: RePEc:nbr:nberwo:13115

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Citations

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Cited by:
  1. François Gourio & Nicolas Roys, 2013. "Size-dependent regulations, firm size distribution, and reallocation," Working Paper Series WP-2013-11, Federal Reserve Bank of Chicago.
  2. Wolfgang Lechthaler & Christian Merkl & Dennis Snower, 2010. "Monetary Persistence and the Labor Market: A New Perspective," CESifo Working Paper Series 2935, CESifo Group Munich.
  3. A. Kerem Coşar & Nezih Guner & James Tybout, 2010. "Firm Dynamics, Job Turnover, and Wage Distributions in an Open Economy," NBER Working Papers 16326, National Bureau of Economic Research, Inc.
  4. Michael W. L. Elsby & Ryan Michaels, 2008. "Marginal Jobs, Heterogeneous Firms, & Unemployment Flows," NBER Working Papers 13777, National Bureau of Economic Research, Inc.
  5. Renato Faccini & Salvador Ortigueira, 2008. "Labor-Market Volatility in the Search-and-Matching Model: The Role of Investment-Specific Technology Shocks," Economics Working Papers ECO2008/39, European University Institute.
  6. Antonella Tutino & Anton Cheremukhin, 2012. "Asymmetric Firm Dynamics under Rational Inattention," 2012 Meeting Papers 161, Society for Economic Dynamics.
  7. R. Jason Faberman & John Haltiwanger & Steven J. Davis, 2010. "Labor Market Flows and Vacancies in the Cross Section and Over Time," 2010 Meeting Papers 1045, Society for Economic Dynamics.
  8. Bart Hobijn & Ayşegül Şahin, 2013. "Firms And Flexibility," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 922-940, 01.
  9. Steven J. Davis & Jason Faberman & John C. Haltiwanger, 2011. "Labor Market Flows in the Cross Section and Over Time," NBER Working Papers 17294, National Bureau of Economic Research, Inc.
  10. João Miguel Ejarque, 2010. "A search model with a quasi network," 2010 Meeting Papers 597, Society for Economic Dynamics.
  11. Jo�o Miguel Ejarque, 2009. "A Search Model with a Quasi-Network," Economics Discussion Papers 665, University of Essex, Department of Economics.
  12. Ryan Michaels & Michael Elsby, 2012. "Fixed Adjustment Costs and Aggregate Fluctuations," 2012 Meeting Papers 679, Society for Economic Dynamics.

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