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What Shifts the Beveridge Curve? Recruiting Intensity and Financial Shocks

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  • Simon Mongey

    (NYU)

  • Gianluca Violante

    (NYU)

  • Alessandro Gavazza

    (London School of Economics)

Abstract

Labor market data show a substantial deterioration of aggregate matching efficiency around the Great Recession, even after controlling for compositional changes among job seekers. We augment the multiworker-firm version of the equilibrium random-matching model of the labor market with endogenous firm entry and exit, a choice of recruiting intensity when hiring, and a dividend constraint that induces some firms to borrow and some of those with debt to default. We use the model to study whether aggregate financial shocks can account for the observed drop in matching efficiency--and the ensuing shift in the Beveridge curve--through a reduction in the average recruiting intensity in the economy. Central to this mechanism is the role of young firms which contribute disproportionately to job creation, display the highest recruitment effort per vacancy and, at the same time, are heavily dependant on external finance.

Suggested Citation

  • Simon Mongey & Gianluca Violante & Alessandro Gavazza, 2015. "What Shifts the Beveridge Curve? Recruiting Intensity and Financial Shocks," 2015 Meeting Papers 1079, Society for Economic Dynamics.
    • Handle: RePEc:red:sed015:1079
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    3. Sylvain Leduc & Zheng Liu, 2016. "The slow job recovery in a macro model of search and recruiting intensity," Working Paper Series 2016-9, Federal Reserve Bank of San Francisco.

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