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Marginal Jobs, Heterogeneous Firms, & Unemployment Flows

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  • Michael W. L. Elsby

Abstract

This paper introduces a notion of fir m size into a search and matching model with endogenous job destruction. The outcome is a rich, yet analytically tractable framework that can be used to analyze a broad set of features of both the cross section and the dynamics of the aggregate labor market. In a set of quantitative applications we show that the model can provide a coherent account of a) the salient features of the distributions of employer size, and employment growth across establishments; b) the amplitude and propagation of cyclical fluctuations in flows between employment and unemployment; c) the negative comovement of unemployment and vacancies in the form of the Beveridge curve; and d) the dynamics of the distribution of employer size over the business cycle.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13777.

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Date of creation: Feb 2008
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Publication status: published as Elsby, Michael W. L., and Ryan Michaels. 2013. "Marginal Jobs, Heterogeneous Firms, and Unemployment Flows." American Economic Journal: Macroeconomics, 5(1): 1-48.
Handle: RePEc:nbr:nberwo:13777

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  1. Russell Cooper & John Haltiwanger & Jonathan L. Willis, 2003. "Dynamics of labor demand : evidence from plant-level observations and aggregate implications," Research Working Paper, Federal Reserve Bank of Kansas City RWP 03-12, Federal Reserve Bank of Kansas City.
  2. Haefke, Christian & Sonntag, Marcus & van Rens, Thijs, 2012. "Wage Rigidity and Job Creation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8968, C.E.P.R. Discussion Papers.
  3. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers, Society for Economic Dynamics 460, Society for Economic Dynamics.
  4. Julio J. Rotemberg, 2008. "Cyclical Wages in a Search-and-Bargaining Model with Large Firms," NBER Chapters, in: NBER International Seminar on Macroeconomics 2006, pages 65-114 National Bureau of Economic Research, Inc.
  5. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  6. Bruce Fallick & Charles A. Fleischman, 2004. "Employer-to-employer flows in the U.S. labor market: the complete picture of gross worker flows," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2004-34, Board of Governors of the Federal Reserve System (U.S.).
  7. Christopher A. Pissarides, 2007. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," CEP Discussion Papers dp0839, Centre for Economic Performance, LSE.
  8. Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(2-3), pages 469-479, 04/05.
  9. Bart Hobijn & Ayşegül Şahin, 2013. "Firms And Flexibility," Economic Inquiry, Western Economic Association International, vol. 51(1), pages 922-940, 01.
  10. Gary Solon & Ryan Michaels & Michael W. L. Elsby, 2009. "The Ins and Outs of Cyclical Unemployment," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 84-110, January.
  11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, American Economic Association, vol. 95(1), pages 25-49, March.
  12. Manuel Toledo & Jose I. Silva, 2005. "Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment," 2005 Meeting Papers, Society for Economic Dynamics 775, Society for Economic Dynamics.
  13. Pietro Garibaldi, 2006. "Hiring Freeze and Bankruptcy in Unemployment Dynamics," Carlo Alberto Notebooks, Collegio Carlo Alberto 7, Collegio Carlo Alberto.
  14. Shigeru Fujita & Garey Ramey, 2006. "The cyclicality of job loss and hiring," Working Papers 06-17, Federal Reserve Bank of Philadelphia.
  15. William Hawkins & Daron Acemoglu, 2010. "Equilibrium Unemployment in a Generalized Search Model," 2010 Meeting Papers, Society for Economic Dynamics 1040, Society for Economic Dynamics.
  16. Russell Cooper & John Haltiwanger & Jonathan L. Willis, 2007. "Implications of Search Frictions: Matching Aggregate and Establishment-level Observations," NBER Working Papers 13115, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Pascal Michaillat, 2010. "Do Matching Frictions Explain Unemployment? Not in Bad Times," CEP Discussion Papers dp1024, Centre for Economic Performance, LSE.
  2. Faccini, Renato & Ortigueira, Salvador, 2010. "Labor-market volatility in the search-and-matching model: The role of investment-specific technology shocks," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 34(8), pages 1509-1527, August.
  3. Philipp Kircher & Leo Kaas, 2010. "Efficient Firm Dynamics in a Frictional Labor Market," 2010 Meeting Papers, Society for Economic Dynamics 89, Society for Economic Dynamics.
  4. Ebell, Monique, 2011. "On the cyclicality of unemployment: Resurrecting the participation margin," Labour Economics, Elsevier, Elsevier, vol. 18(6), pages 822-836.
  5. Murat Tasci & Andrea Pescatori, 2011. "Search Frictions and the Labor Wedge," IMF Working Papers 11/117, International Monetary Fund.
  6. R. Jason Faberman & John Haltiwanger & Steven J. Davis, 2010. "Labor Market Flows and Vacancies in the Cross Section and Over Time," 2010 Meeting Papers, Society for Economic Dynamics 1045, Society for Economic Dynamics.
  7. Ryuta Ray Kato & Hiroaki Miyamoto, 2013. "Fiscal Stimulus in an Endogenous Job Separation Model," Working Papers, Research Institute, International University of Japan EMS_2013_02, Research Institute, International University of Japan.
  8. Davis, Steven J. & Faberman, R. Jason & Haltiwanger, John, 2012. "Labor market flows in the cross section and over time," Journal of Monetary Economics, Elsevier, Elsevier, vol. 59(1), pages 1-18.
  9. Hiroaki Miyamoto, 2006. "Cyclical Behavior of a Matching Model with Capital Investment," Working Papers, Research Institute, International University of Japan EMS_2010_14, Research Institute, International University of Japan, revised Oct 2010.
  10. Christopher L. House & Jing Zhang, 2012. "Layoffs, Lemons and Temps," NBER Working Papers 17962, National Bureau of Economic Research, Inc.
  11. Alan Manning, 2010. "Imperfect competition in the labour market," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 28729, London School of Economics and Political Science, LSE Library.
  12. Regis Barnichon, 2009. "Demand-driven job separation: reconciling search models with the ins and outs of unemployment," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 2009-24, Board of Governors of the Federal Reserve System (U.S.).

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