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The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited

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Listed:
  • Marcus Hagedorn
  • Iourii Manovskii

Abstract

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)

Suggested Citation

  • 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.
    • 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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    References listed on IDEAS

    as
    1. Garey Ramey & Joel Watson, 1997. "Contractual Fragility, Job Destruction, and Business Cycles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 873-911.
    2. Christopher A. Pissarides, 1994. "Search Unemployment with On-the-job Search," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 61(3), pages 457-475.
    3. Michael J. Pries, 2004. "Persistence of Employment Fluctuations: A Model of Recurring Job Loss," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 71(1), pages 193-215.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • 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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