The Dual Beveridge Curve

The recent behavior of the Beveridge Curve significantly differs from past recessions and is hard to explain with traditional gradual changes in fundamentals. We propose a novel dual vacancy model where we acknowledge that not all vacancies are made equal—when firms post a vacancy they can hire from unemployment or they can poach a worker from another firm. Our dual vacancy model segments the labor market into separate search processes for unemployed and employed workers and provides a better fit to the data than traditional models assuming a homogeneous market. By analyzing labor market data from 2000 onwards, we estimate the proportions of the two types of vacancies and find a significant rise in poaching vacancies since the mid-2010s. The behavior of the share of poaching vacancies is explained by the residual hires to quits ratio and by an increasing trend in the profit-cost ratio of these positions. Once we adjust the Beveridge Curve to only include vacancies for the unemployed, the recent puzzling behavior disappears. These results imply that a slowdown in the demand for overall workers is likely to have a diminished effect on unemployment, affecting the implications of monetary policy for unemployment.