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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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References

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  1. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  2. Marcus Hagedorn & Iourii Manovskii, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," 2005 Meeting Papers 460, Society for Economic Dynamics.
  3. Christian Haefke & Marcus Sonntag & Thijs van Rens, 2007. "Wage rigidity and job creation," Economics Working Papers 1047, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2012.
  4. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  5. Rotemberg, Julio J., 2006. "Cyclical Wages in a Search-and-Bargaining Model with Large Firms," CEPR Discussion Papers 5791, C.E.P.R. Discussion Papers.
  6. William Hawkins & Daron Acemoglu, 2007. "Equilibrium Unemployment in a Generalized Search Model," 2007 Meeting Papers 384, Society for Economic Dynamics.
  7. Pietro Garibaldi, 2006. "Hiring Freeze and Bankruptcy in Unemployment Dynamics," 2006 Meeting Papers 227, Society for Economic Dynamics.
  8. Robert Shimer, 2004. "The Consequences of Rigid Wages in Search Models," NBER Working Papers 10326, National Bureau of Economic Research, Inc.
  9. Shigeru Fujita & Garey Ramey, 2006. "The cyclicality of job loss and hiring," Working Papers 06-17, Federal Reserve Bank of Philadelphia.
  10. Manuel Toledo & Jose I. Silva, 2005. "Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment," 2005 Meeting Papers 775, Society for Economic Dynamics.
  11. Christopher A. Pissarides, 2007. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," CEP Discussion Papers dp0839, Centre for Economic Performance, LSE.
  12. 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.).
  13. 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.
  14. Bart Hobijn & Aysegül Sahin, 2007. "Firms and flexibility," Staff Reports 311, Federal Reserve Bank of New York.
  15. Russel W. Cooper & John C. Haltiwanger & Jonathan Willis, 2004. "Dynamics of Labor Demand: Evidence from Plant-level Observations and Aggregate Implications," NBER Working Papers 10297, National Bureau of Economic Research, Inc.
  16. Michael W. Elsby & Ryan Michaels & Gary Solon, 2007. "The Ins and Outs of Cyclical Unemployment," NBER Working Papers 12853, National Bureau of Economic Research, Inc.
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Cited by:
  1. Andrea Pescatori & Murat Tasci, 2011. "Search frictions and the labor wedge," Working Paper 1111, Federal Reserve Bank of Cleveland.
  2. Leo Kaas & Philipp Kircher, 2011. "Efficient Firm Dynamics in a Frictional Labor Market," CESifo Working Paper Series 3336, CESifo Group Munich.
  3. Manning, Alan, 2011. "Imperfect Competition in the Labor Market," Handbook of Labor Economics, Elsevier, Elsevier.
  4. 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.
  5. Hiroaki Miyamoto, 2006. "Cyclical Behavior of a Matching Model with Capital Investment," Working Papers EMS_2010_14, Research Institute, International University of Japan, revised Oct 2010.
  6. Pascal Michaillat, 2010. "Do Matching Frictions Explain Unemployment? Not in Bad Times," CEP Discussion Papers dp1024, Centre for Economic Performance, LSE.
  7. 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.).
  8. Christopher L. House & Jing Zhang, 2012. "Layoffs, Lemons and Temps," NBER Working Papers 17962, National Bureau of Economic Research, Inc.
  9. Ryuta Ray Kato & Hiroaki Miyamoto, 2013. "Fiscal Stimulus in an Endogenous Job Separation Model," Working Papers EMS_2013_02, Research Institute, International University of Japan.
  10. 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.
  11. Ebell, Monique, 2011. "On the cyclicality of unemployment: Resurrecting the participation margin," Labour Economics, Elsevier, vol. 18(6), pages 822-836.
  12. 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.

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