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Worker flows and job flows: a quantitative investigation

Author

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  • Shigeru Fujita
  • Makoto Nakajima

Abstract

Worker flows and job flows behave differently over the business cycle. The authors investigate the sources of the differences by studying quantitative properties of a multiple-worker version of the search/matching model that features endogenous job separation and intra-firm wage bargaining. Their calibration incorporates micro- and macro-level evidence on worker and job flows. The authors show that the dynamic stochastic equilibrium of the model replicates important cyclical features of worker flows and job flow simultaneously. In particular, the model correctly predicts that hires from unemployment move countercyclically while the job creation rate moves procyclically. The key to this result is to allow for a large hiring flow that does not go through unemployment but is part of job creation, for which procyclicality of the job finding rate dominates its cyclicality. The authors also show that the model generates large volatilities of unemployment and vacancies when a worker's outside option is at 83 percent of aggregate labor productivity.

Suggested Citation

  • Shigeru Fujita & Makoto Nakajima, 2009. "Worker flows and job flows: a quantitative investigation," Working Papers 09-33, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:09-33
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Kudoh, Noritaka & Miyamoto, Hiroaki & Sasaki, Masaru, 2015. "Employment and Hours over the Business Cycle in a Model with Search Frictions," IZA Discussion Papers 8946, Institute for the Study of Labor (IZA).
    2. Andrea Pescatori & Murat Tasci, 2011. "Search frictions and the labor wedge," Working Paper 1111, Federal Reserve Bank of Cleveland.
    3. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, pages 3030-3060.
    4. Davis, Steven J. & Faberman, R. Jason & Haltiwanger, John, 2012. "Labor market flows in the cross section and over time," Journal of Monetary Economics, Elsevier, vol. 59(1), pages 1-18.
    5. Ratner, David, 2013. "Unemployment Insurance Experience Rating and Labor Market Dynamics," Finance and Economics Discussion Series 2013-86, Board of Governors of the Federal Reserve System (U.S.).
    6. Shigeru Fujita & Makoto Nakajima, 2016. "Worker Flows and Job Flows: A Quantitative Investigation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 22, pages 1-20, October.
    7. Bachmann, Rüdiger & Bayer, Christian & Merkl, Christian & Seth, Stefan & Stüber, Heiko & Wellschmied, Felix, 2017. "Worker Churn and Employment Growth at the Establishment Level," IZA Discussion Papers 11063, Institute for the Study of Labor (IZA).
    8. Nicolas Roys, 2010. "Estimating Labor Market Rigidities with Heterogeneous Firms," 2010 Meeting Papers 127, Society for Economic Dynamics.
    9. Wellschmied, Felix Maximilian & Bachmann, Rüdiger & Bayer, Christian & Seth, Stefan, 2013. "Cyclicality of Job and Worker Flows: New Data and a New Set of Stylized Facts," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79874, Verein für Socialpolitik / German Economic Association.
    10. Hawkins, William B. & Acemoglu, Daron, 2014. "Search with multi-worker firms," Theoretical Economics, Econometric Society, vol. 9(3), September.
    11. Jiwoon Kim, 2013. "Bargaining with Existing Workers, Over-hiring of Firms, and Labor Market Fluctuations," 2013 Meeting Papers 721, Society for Economic Dynamics.
    12. Ismail Baydur, 2017. "Worker Selection, Hiring, and Vacancies," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(1), pages 88-127, January.
    13. Bachmann, Rüdiger & Bayer, Christian & Merkl, Christian & Seth, Stefan & Stüber, Heiko & Wellschmied, Felix, 2017. "Job and worker flows: New stylized facts for Germany," FAU Discussion Papers in Economics 02/2017, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    14. Steven J. Davis & John Haltiwanger, 2014. "Labor Market Fluidity and Economic Performance," NBER Working Papers 20479, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Employment ; Business cycles;

    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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