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Worker flows and job flows: a quantitative investigation

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  • Shigeru Fujita
  • Makoto Nakajima

Abstract

This paper studies the quantitative properties of a multiple-worker firm matching model with on-the-job search where heterogeneous firms operate decreasing-returns-to-scale production technology. We focus on the model's ability to replicate the business cycle features of job flows, worker flows between employment and unemployment, and job-to-job transitions. The calibrated model successfully replicates (i) countercyclical worker flows between employment and unemployment, (ii) procyclical job-to-job transitions, and (iii) opposite movements of job creation and destruction rates over the business cycle. The cyclical properties of worker flows between employment and unemployment differ from those of job flows, partly because of the presence of job-to-job transitions. We also show, however, that job flows measured by net employment changes differ significantly from total worker separation and accession rates, because separations also occur at firms with positive net employment changes, and similarly firms that are shrinking on net may hire workers to partially offset attritions. The presence of job-to-job transitions is the key to producing these differences.

Suggested Citation

  • Shigeru Fujita & Makoto Nakajima, 2013. "Worker flows and job flows: a quantitative investigation," Working Papers 13-09, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:13-09
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    References listed on IDEAS

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    More about this item

    Keywords

    Employment; Unemployment;

    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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