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Search, Shirking and Labor Market Volatility

Author

Listed:
  • Christopher Martin

    (University of Bath)

  • Bingsong Wang

    (University of Warwick)

Abstract

This paper proposes a modified version of the standard search and matching model of the labour market that combines a shirking mechanism with the assumption that firms post wages. We argue that a small shirking effect will generate a low rate of profit and lead to a low rate of vacancy creation, implying that the vacancy filling rate is high. Through this mechanism we show that our model delivers a close match of 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.

Suggested Citation

  • Christopher Martin & Bingsong Wang, 2016. "Search, Shirking and Labor Market Volatility," Department of Economics Working Papers 56/16, University of Bath, Department of Economics.
  • Handle: RePEc:eid:wpaper:52882
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    References listed on IDEAS

    as
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    More about this item

    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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