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Labor Market Matching under Imperfect Information

Author

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  • Tim Willems

    (University of Amsterdam)

Abstract

Recent research has shown that the standard labor matching model hasdifficulties in reproducing the co-movement patterns observed in US data. Thisis due to the fact that the standard model lacks sufficient propagation of shocks.This paper shows that refining the informational structure of the model leadsto improvements along this dimension: when agents cannot separately identifypersistent and transitory technology shocks on impact (so that they must solvea signal extraction problem), shocks are propagated. Under this specificationthe standard matching model even manages to make recoveries initially jobless,as in the data.

Suggested Citation

  • Tim Willems, 2010. "Labor Market Matching under Imperfect Information," Tinbergen Institute Discussion Papers 10-098/2, Tinbergen Institute, revised 13 May 2011.
    • Handle: RePEc:tin:wpaper:20100098
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    File URL: https://papers.tinbergen.nl/10098.pdf
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    References listed on IDEAS

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    1. Sweder van Wijnbergen & Tim Willems, 2013. "Imperfect information, lagged labour adjustment, and the Great Moderation," Oxford Economic Papers, Oxford University Press, vol. 65(2), pages 219-239, April.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
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    5. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
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    7. Olivier J. Blanchard & Jean-Paul L'Huillier & Guido Lorenzoni, 2013. "News, Noise, and Fluctuations: An Empirical Exploration," American Economic Review, American Economic Association, vol. 103(7), pages 3045-3070, December.
    8. Cole, Harold L & Rogerson, Richard, 1999. "Can the Mortensen-Pissarides Matching Model Match the Business-Cycle Facts?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 933-959, November.
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    11. Fujita, Shigeru & Ramey, Garey, 2007. "Job matching and propagation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3671-3698, November.
    12. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
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    Cited by:

    1. Christian Glocker, 2012. "Unemployment compensation and aggregate fluctuations," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 59(1), pages 21-39, March.

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    More about this item

    Keywords

    imperfect information; labor market matching; signal extraction; jobless growth;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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