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Specific Capital and Vintage Effects on the Dynamics of Unemployment and Vacancies

  • Burcu Eyigungor

In a reasonably calibrated Mortensen and Pissarides matching model, shocks to average labor productivity can account for a small portion of the fluctuations in unemployment and vacancies (Shimer (2005)). I add heterogeneity in jobs (matches) with respect to the time the job is created in the form of different embodied technology levels. I also introduce specific capital that, once adapted for a match, has less value in another match. I show that the augmented model can account for fluctuations in unemployment and vacancies, and that specific capital is important to decreasing the volatility of the destruction rate of existing matches.

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.3.1214
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 100 (2010)
Issue (Month): 3 (June)
Pages: 1214-37

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Handle: RePEc:aea:aecrev:v:100:y:2010:i:3:p:1214-37
Note: DOI: 10.1257/aer.100.3.1214
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