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The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited

  • Marcus Hagedorn
  • Iourii Manovskii

Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We propose a new calibration strategy of the standard model that uses data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters –- the value of nonmarket activity and the bargaining weights. Our calibration implies that the model is consistent with the data. (JEL E24, E32, J31, J63, J64)

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File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.4.1692
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File URL: http://www.aeaweb.org/aer/data/sept08/20060403_data.zip
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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 4 (September)
Pages: 1692-1706

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Handle: RePEc:aea:aecrev:v:98:y:2008:i:4:p:1692-1706
Note: DOI: 10.1257/aer.98.4.1692
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  1. Michael J. Pries, 2004. "Persistence of Employment Fluctuations: A Model of Recurring Job Loss," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 193-215, 01.
  2. Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 457-75, July.
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