Heterogeneity, Job Creation and Unemployment Volatility
In this paper, I explore the impact of match-specific heterogeneity at the job creation margin on business cycle fluctuations. I show that this form of heterogeneity alone does not help to amplify labor market volatility, either under full or under asymmetric information. First, I show analytically that, under full information, heterogeneity has no first-order effect on the response of unemployment and job creation to productivity, and actually tends to dampen the response of market tightness. Then, in a series of calibrations, I show that with both full and asymmetric information, the model delivers labor market volatilities close to the representative-agent, full-information benchmark. Copyright The editors of the "Scandinavian Journal of Economics" 2008 .
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Volume (Year): 109 (2008)
Issue (Month): 4 (03)
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