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Mismatch

  • Robert Shimer

This paper develops a dynamic model of mismatch. Workers and jobs are randomly allocated to labor markets. Each market clears, but some have excess (unemployed) workers and some have excess (vacant) jobs. As workers and jobs switch markets, unemployed workers find vacancies and employed workers become unemployed. The model is quantitatively consistent with the business cycle frequency comovement of unemployment, vacancies, and the job finding rate and explains much of these variables' volatility. It can also address cyclicality in the separation rate into unemployment and duration dependence in the job finding rate. The results are robust to some nonrandom mobility. (JEL E24, J41, J63, J64)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.97.4.1074
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File URL: http://www.aeaweb.org/aer/data/sept07/20051275_data.zip
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 97 (2007)
Issue (Month): 4 (September)
Pages: 1074-1101

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Handle: RePEc:aea:aecrev:v:97:y:2007:i:4:p:1074-1101
Note: DOI: 10.1257/aer.97.4.1074
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  14. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
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  16. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  17. Barbara Petrongolo & Christopher Pissarides, 2000. "Looking into the black box: a survey of the matching function," LSE Research Online Documents on Economics 2122, London School of Economics and Political Science, LSE Library.
  18. Coles, Melvyn G & Petrongolo, Barbara, 2002. "A Test Between Unemployment Theories Using Matching Data," CEPR Discussion Papers 3241, C.E.P.R. Discussion Papers.
  19. Wouter J. den Haan & Garey Ramey & Joel Watson, 1997. "Job Destruction and Propagation of Shocks," NBER Working Papers 6275, National Bureau of Economic Research, Inc.
  20. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
  21. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  22. Robert E. Hall, 1999. "Reorganization," NBER Working Papers 7181, National Bureau of Economic Research, Inc.
  23. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  24. DREZE, Jacques & BEAN, Charles, 1990. "Europe's employment problem: Introduction and synthesis," CORE Discussion Papers 1990041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  26. Robert Shimer, 2012. "Reassessing the Ins and Outs of Unemployment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 15(2), pages 127-148, April.
  27. Melvyn G. Coles & Abhinay Muthoo, 1998. "Strategic Bargaining and Competitive Bidding in a Dynamic Market Equilibrium," Review of Economic Studies, Oxford University Press, vol. 65(2), pages 235-260.
  28. Melvyn Coles & Barbara Petrongolo, 2003. "A test between unemployment theories using matching data," LSE Research Online Documents on Economics 3663, London School of Economics and Political Science, LSE Library.
  29. Bent Hansen, 1970. "Excess Demand, Unemployment, Vacancies, and Wages," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 1-23.
  30. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
  31. Curtis R. Taylor, 1995. "The Long Side of the Market and the Short End of the Stick: Bargaining Power and Price Formation in Buyers', Sellers', and Balanced Markets," The Quarterly Journal of Economics, Oxford University Press, vol. 110(3), pages 837-855.
  32. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
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