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Job Creation and Job Destruction in the Theory of Unemployment

  • Dale T. Mortensen
  • Christopher A. Pissarides

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

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Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0110.

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Date of creation: May 1993
Date of revision:
Handle: RePEc:cep:cepdps:dp0110
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