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Capital Values and Job Values

Listed author(s):
  • Eran Yashiv

    ()

    (Tel Aviv University
    Centre for Macroeconomics (CFM))

This paper explores how the joint behavior of hiring and investment is governed by the expected present values of capital and of jobs. It uses a model of frictions, which is a combination of a search model of the labor market and a q-type model of the capital market, emphasizing the interaction of capital and labor frictions. Relying on structural estimation of private sector U.S. data, it studies the future determinants of capital and job values and the implications for U.S. labor market developments. Key findings include: (i) complementarity between the hiring and investment processes; (ii) important cross e§ects, of the value of capital on the mean and the volatility of the hiring rate, and vice versa; (iii) future returns are shown to play a dominant role in determining capital and job values; and (iv) U.S. labor market developments, including the outward shift of the Beveridge curve in the Great Recession and its aftermath 2007-2013, can be accounted for by changes in job and capital values.

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File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2015/CFMDP2015-02-Paper.pdf
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Paper provided by Centre for Macroeconomics (CFM) in its series Discussion Papers with number 1502.

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Length: 69 pages
Date of creation: Jan 2015
Handle: RePEc:cfm:wpaper:1502
Contact details of provider: Web page: http://www.centreformacroeconomics.ac.uk/

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