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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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    Cited by:

    1. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    2. 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.
    3. David Ratner, 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.).
    4. Nicolas Roys, 2010. "Estimating Labor Market Rigidities with Heterogeneous Firms," 2010 Meeting Papers 127, Society for Economic Dynamics.
    5. Andrea Pescatori & Murat Tasci, 2011. "Search frictions and the labor wedge," Working Papers (Old Series) 1111, Federal Reserve Bank of Cleveland, revised 2011.
    6. Murat Tasci & Andrea Pescatori, 2011. "Search Frictions and the Labor Wedge," 2011 Meeting Papers 371, Society for Economic Dynamics.
    7. Jiwoon Kim, 2013. "Bargaining with Existing Workers, Over-hiring of Firms, and Labor Market Fluctuations," 2013 Meeting Papers 721, Society for Economic Dynamics.

    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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