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Job Creation and Job Destruction in the Theory of Unemployment

Author

Listed:
  • Mortensen, Dale

    (Northwestern University, USA)

  • Pissarides, Christopher

    (London school of economics)

Abstract

In this paper a job-specific shock process in the matching model of unemployment with non-cooperative wage behaviour is modeled. The authors obtain endogenous job creation and job destruction processes and study their properties. They show that an aggregate shock induces negative correlation between job creation and job destruction whereas a dispersion shock induces positive correlation. The job destruction process is shown to have more volatile dynamics than the job creation process. In simulations the authors show that an aggregate shock process proxies reasonably well the cyclical behaviour of job creation and job destruction in the United States.

Suggested Citation

  • Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
  • Handle: RePEc:rnp:ecopol:1119
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