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Interpreting the Beveridge curve. An agent-based approach

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  • Cardullo, Gabriele
  • Guerci, Eric

Abstract

We construct an agent based computational model of the labour market with heterogeneous workers and firms to study the behaviour of the Beveridge curve along the business cycle. In this framework, search frictions arise because filling a vacancy is a costly activity that takes time, whereas productivity mismatch comes from firms’ imperfect information about the value of the workers before the job interview takes place. The model offers an interpretation for the outward movement exhibited by the U.S. Beveridge curve since the last months of 2009. Sectoral misallocation plays a role. Moreover, when the speed of recovery from a recession is not uniform across sectors, unemployed workers are less selective in their application strategy and firms must spend more time in choosing the best match. Unemployment remains high in spite of an increase in the number of vacancies.

Suggested Citation

  • Cardullo, Gabriele & Guerci, Eric, 2019. "Interpreting the Beveridge curve. An agent-based approach," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 84-100.
  • Handle: RePEc:eee:jeborg:v:157:y:2019:i:c:p:84-100
    DOI: 10.1016/j.jebo.2017.12.003
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