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Cyclical Behavior of Unemployment and Job Vacancies in Japan

This paper studies whether the Mortensen and Pissarides (MP) search and matching model can explain the observed labor market fluctuations in Japan. Although the MP model correctly predicts the observed regularities in the cyclical fluctuations of unemployment and job vacancies, it cannot generate the observed unemployment and vacancy fluctuations in response to productivity shock of reasonable size. I incorporate separation shocks and training costs into the MP model, finding that their inclusions do not significantly improve the ability of the model to explain the cyclical volatility of unemployment and vacancies observed in the Japanese labor market. This paper also provides the business-cycle properties of the Japanese labor market.

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File URL: http://www.iuj.ac.jp/workingpapers/index.cfm?File=EMS_2009_17.pdf
File Function: First version, 2009
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Paper provided by Research Institute, International University of Japan in its series Working Papers with number EMS_2009_17.

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Length: 26 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:iuj:wpaper:ems_2009_17
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  1. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "Job reallocation, employment fluctuations and unemployment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 18, pages 1171-1228 Elsevier.
  2. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  3. Costain, James S. & Reiter, Michael, 2008. "Business cycles, unemployment insurance, and the calibration of matching models," Journal of Economic Dynamics and Control, Elsevier, vol. 32(4), pages 1120-1155, April.
  4. Dale T. Mortensen & Eva Nagypal, 2005. "More on Unemployment and Vacancy Fluctuations," NBER Working Papers 11692, National Bureau of Economic Research, Inc.
  5. Thomas Lubik & Michael Krause, 2004. "On-the-Job Search and the Cyclical Dynamics of the Labor Market," Economics Working Paper Archive 513, The Johns Hopkins University,Department of Economics.
  6. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
  7. Ramey, Garey & Fujita, Shigeru, 2006. "Job Matching and Propagation," University of California at San Diego, Economics Working Paper Series qt53s671h7, Department of Economics, UC San Diego.
  8. Silva, José Ignacio & Toledo, Manuel, 2009. "Labor Turnover Costs And The Cyclical Behavior Of Vacancies And Unemployment," Macroeconomic Dynamics, Cambridge University Press, vol. 13(S1), pages 76-96, May.
  9. Silva, José Ignacio & Toledo, Manuel, 2009. "The Unemployment Volatility Puzzle: The Role of Matching Costs Revisited," MPRA Paper 15695, University Library of Munich, Germany.
  10. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  11. Murat Tasci, 2007. "On-the-job search and labor market reallocation," Working Paper 0725, Federal Reserve Bank of Cleveland.
  12. John P. Martin, 1998. "What Works Among Active Labour Market Policies: Evidence From OECD Countries' Experiences," OECD Labour Market and Social Policy Occasional Papers 35, OECD Publishing.
  13. Robert Shimer, 2007. "Reassessing the Ins and Outs of Unemployment," NBER Working Papers 13421, National Bureau of Economic Research, Inc.
  14. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
  15. Burgess, Simon & Turon, Hélène, 2010. "Worker flows, job flows and unemployment in a matching model," European Economic Review, Elsevier, vol. 54(3), pages 393-408, April.
  16. Hagedorn, Marcus & Manovskii, Iourii, 2008. "The cyclical behavior of equilibrium unemployment and vacancies revisited," Working Paper Series 0853, European Central Bank.
  17. Zhang Min, 2008. "Cyclical Behavior of Unemployment and Job Vacancies: A Comparison between Canada and the United States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-37, October.
  18. Abe, Masahiro & Ohta, Souichi, 2001. "Fluctuations in Unemployment and Industry Labor Markets," Journal of the Japanese and International Economies, Elsevier, vol. 15(4), pages 437-464, December.
  19. Hiroaki Miyamoto & Yoshimasa Shirai, 2006. "Job Flows And Unemployment In An Equilibrium Unemployment Model With Firm-Specific Skill Training," The Japanese Economic Review, Japanese Economic Association, vol. 57(4), pages 547-561.
  20. Shigeru Fujita & Garey Ramey, 2007. "The cyclicality of separation and job finding rates," Working Papers 07-19, Federal Reserve Bank of Philadelphia.
  21. Robert E. Hall & Paul R. Milgrom, 2005. "The Limited Influence of Unemployment on the Wage Bargain," NBER Working Papers 11245, National Bureau of Economic Research, Inc.
  22. Dale Mortensen & �va Nagypál, 2008. "Labor-market Volatility in Matching Models with Endogenous Separations," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 645-665, 03.
  23. Kuroda, Sachiko, 2003. "Analysis of Changes in Japan's Unemployment Rate Using Gross Flow Data," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 21(1), pages 69-104, February.
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