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Specific capital and vintage effects on the dynamics of unemployment and vacancies

Listed author(s):
  • Burcu Eyigungor

In a reasonably calibrated Mortensen and Pissarides matching model, shocks to average labor productivity can account for only a small portion of the fluctuations in unemployment and vacancies (Shimer (2005a)). In this paper, the author argues that if vintage specific shocks rather than aggregate productivity shocks are the driving force of fluctuations, the model does a better job of accounting for the data. She adds heterogeneity in jobs (matches) with respect to the time the job is created in the form of different embodied technology levels. The author also introduces specific capital that, once adapted for a match, has less value in another match. In the quantitative analysis, she shows that shocks to different vintages of entrants are able to account for fluctuations in unemployment and vacancies and that, in this environment, specific capital is important to decreasing the volatility of the destruction rate of existing matches.

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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 08-6.

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Date of creation: 2008
Handle: RePEc:fip:fedpwp:08-6
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  26. Dale T. Mortensen & Eva Nagypal, 2005. "More on Unemployment and Vacancy Fluctuations," NBER Working Papers 11692, National Bureau of Economic Research, Inc.
  27. Simon Gilchrist & John C. Williams, 1998. "Putty-Clay and Investment: A Business Cycle Analysis," NBER Working Papers 6812, National Bureau of Economic Research, Inc.
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  29. Gueorgui Kambourov & Iourii Manovskii, 2009. "Occupational Specificity Of Human Capital," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(1), pages 63-115, 02.
  30. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
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