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Search, shirking and labor market volatility

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  • Martin, Christopher
  • Wang, Bingsong

Abstract

This paper proposes a modified version of the standard search and matching model of the labour market that includes a shirking mechanism. We show that our model delivers a close match to the simulated volatilities, correlations and autocorrelations of unemployment, vacancies, labour market tightness and the job finding rate with values observed in US data. In doing so, it outperforms prominent alternative models. Our model also has novel policy implications for the impact of income taxes, subsidies on hiring and employment taxes on unemployment and its volatility.

Suggested Citation

  • Martin, Christopher & Wang, Bingsong, 2020. "Search, shirking and labor market volatility," Journal of Macroeconomics, Elsevier, vol. 66(C).
  • Handle: RePEc:eee:jmacro:v:66:y:2020:i:c:s0164070420301695
    DOI: 10.1016/j.jmacro.2020.103243
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    More about this item

    Keywords

    Search frictions; Shirking; Unemployment volatility puzzle;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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