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Matching Models Under Scrutiny : Understanding the Shimer Puzzle

Author

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  • Gabriele, CARDULLO

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Two papers have recently questioned the quantitative consistency of the search and matching models. Shimer (2005) has argued that a text-book matching model is unable to explain the cyclical variation of unemployment and vacancies in the U.S. economy. Costain and Reiter (2007) have found the existence of a trade-off in the model’s performance : any attempt to change the calibrated values in order to amend such business cycle inability would jeopardize the model’s predictions about the impact of unemployment benefits on the hazard rate. In surveying the literature originated in these findings, I distinguish three different avenues that have been followed to corret the model : change in wage formation, change in the calibration, changes in the model specification. The last approach seems to reach the best results both from a business cycle and from a microeconomic viewpoint.

Suggested Citation

  • Gabriele, CARDULLO, 2008. "Matching Models Under Scrutiny : Understanding the Shimer Puzzle," Discussion Papers (ECON - Département des Sciences Economiques) 2008009, Université catholique de Louvain, Département des Sciences Economiques.
    • Handle: RePEc:ctl:louvec:2008009
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    File URL: http://sites.uclouvain.be/econ/DP/IRES/2008-9.pdf
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    Citations

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    Cited by:

    1. Gabriele Cardullo & Marco Guerrazzi, 2016. "The Cyclical Volatility of Equilibrium Unemployment and Vacancies: Evidence From Italy," LABOUR, CEIS, vol. 30(4), pages 433-454, December.
    2. Claire A. Reicher, 2016. "Matching labor’s share in a search and matching model," Empirical Economics, Springer, vol. 50(4), pages 1229-1254, June.
    3. Steven Kivinen, 2017. "Unemployment Volatility and Networks," Working Papers daleconwp2017-02, Dalhousie University, Department of Economics.
    4. Marlène Isoré, 2011. "International Propagation of Financial Shocks in a Search and Matching Environment," FIW Working Paper series 068, FIW.
    5. Meradj Mortezapouraghdam, 2016. "Three Essays on the Role of Frictions in the Economy," Sciences Po publications info:hdl:2441/293qice3lj8, Sciences Po.
    6. Koursaros, Demetris, 2019. "Learning expectations using multi-period forecasts," Journal of Economics and Business, Elsevier, vol. 102(C), pages 1-25.
    7. 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.
    8. Nordmeier, Daniela, 2012. "Worker flows in Germany: Inspecting the time aggregation bias," IAB-Discussion Paper 201212, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    9. repec:hal:spmain:info:hdl:2441/293qice3lj861rvos9ns14n0h0 is not listed on IDEAS
    10. repec:zbw:bofrdp:2016_028 is not listed on IDEAS
    11. Hie Joo Ahn & Ling Shao, 2017. "Precautionary On-the-Job Search over the Business Cycle," Finance and Economics Discussion Series 2017-025, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Keywords

    Search-matching equilibrium; Business Cycles; Labour markets;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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