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Do Job Destruction Shocks Matter in the Theory of Unemployment?

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Abstract

The current DMP approach to labor markets presumes job destruction shocks are small. We relax that assumption and also allow un lled jobs, like unemployment, to evolve as a state variable. Calibrating an otherwise standard DMP framework, we identify a remarkable, (almost) perfect, fit of the empirical facts as reported in Shimer (2005, 2012). The results, how- ever, are also consistent with the insights of Davis and Haltiwanger (1992): that unemployment volatility is driven by large but infrequent job separation shocks. The approach not only provides an important synthesis of two litera- tures which, in other contexts, have appeared contradictory, it also identfies a more traditional view of the timing and progression of recessions.

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  • Coles, M & Kelishomi, AM, 2015. "Do Job Destruction Shocks Matter in the Theory of Unemployment?," Economics Discussion Papers 14462, University of Essex, Department of Economics.
  • Handle: RePEc:esx:essedp:14462
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Do Job Destruction Shocks Matter in the Theory of Unemployment?
      by Christian Zimmermann in NEP-DGE blog on 2016-02-20 03:01:08

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    Cited by:

    1. Yusuf Mercan & Benjamin Schoefer, 2020. "Jobs and Matches: Quits, Replacement Hiring, and Vacancy Chains," American Economic Review: Insights, American Economic Association, vol. 2(1), pages 101-124, March.
    2. Ellington, Michael & Martin, Chris & Wang, Bingsong, 2021. "Search Frictions and Evolving Labour Market Dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    3. Riccardo M. Masolo, 2022. "Mainly Employment: Survey-Based News and the Business Cycle," Discussion Papers 2211, Centre for Macroeconomics (CFM).
    4. Den Haan, Wouter J. & Freund, Lukas B. & Rendahl, Pontus, 2021. "Volatile hiring: uncertainty in search and matching models," Journal of Monetary Economics, Elsevier, vol. 123(C), pages 1-18.
    5. Adjemian, Stéphane & Karamé, Frédéric & Langot, François, 2021. "Nonlinearities and Workers' Heterogeneity in Unemployment Dynamics," IZA Discussion Papers 14822, Institute of Labor Economics (IZA).
    6. Guimarães, Luís & Mazeda Gil, Pedro, 2022. "Looking ahead at the effects of automation in an economy with matching frictions," Journal of Economic Dynamics and Control, Elsevier, vol. 144(C).
    7. Yusuf Mercan & Benjamin Schoefer & Petr Sedláček, 2020. "A Congestion Theory of Unemployment Fluctuations," CESifo Working Paper Series 8731, CESifo.
    8. Christian Haefke & Michael Reiter, 2020. "Long Live the Vacancy," Working Papers 20200054, New York University Abu Dhabi, Department of Social Science, revised Sep 2020.
    9. Robert E. Hall & Marianna Kudlyak, 2022. "Why Has the US Economy Recovered So Consistently from Every Recession in the Past 70 Years?," NBER Macroeconomics Annual, University of Chicago Press, vol. 36(1), pages 1-55.
    10. Yusuf Mercan & Benjamin Schoefer & Petr Sedláček, 2024. "A Congestion Theory of Unemployment Fluctuations," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(1), pages 238-285, January.
    11. Niklas Engbom, 2019. "Application Cycles," 2019 Meeting Papers 1170, Society for Economic Dynamics.
    12. Miroslav Gabrovski & Mario Rafael Silva, 2023. "Unemployment and Labor Productivity Co-movement: the Role of Firm Exit," Working Papers 202301, University of Hawaii at Manoa, Department of Economics.
    13. Pawel M. Krolikowski & Kurt G. Lunsford, 2024. "Advance layoff notices and aggregate job loss," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(3), pages 462-480, April.
    14. Guimarães, Luís & Mazeda Gil, Pedro, 2022. "Explaining the Labor Share: Automation Vs Labor Market Institutions," Labour Economics, Elsevier, vol. 75(C).
    15. Joshua Bernstein & Alexander W. Richter & Nathaniel A. Throckmorton, 2020. "The Business Cycle Mechanics of Search and Matching Models," Working Papers 2026, Federal Reserve Bank of Dallas.
    16. Nikolaos Kokonas & Paulo Santos Monteiro, 2020. "The Ins and Outs of Unemployment in General Equilibrium," Discussion Papers 2014, Centre for Macroeconomics (CFM).
    17. Joshua Bernstein & Alexander W. Richter & Nathaniel A. Throckmorton, 2021. "Nonlinear Search and Matching Explained," Working Papers 2106, Federal Reserve Bank of Dallas.

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    More about this item

    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
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • 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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