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  • Robert Shimer

This paper develops a dynamic model of mismatch. Workers and jobs are randomly assigned to labor markets. Each labor market clears at each instant but some labor markets have more workers than jobs, hence unemployment, and some have more jobs than workers, hence vacancies. As workers and jobs move between labor markets, some unemployed workers find vacant jobs and some employed workers lose or leave their job and become unemployed. The model is quantitatively consistent with the comovement of unemployment, job vacancies, and the rate at which unemployed workers find jobs over the business cycle. It can also address a variety of labor market phenomena, including duration dependence in the job finding probability and employer-to-employer transitions, and it helps explain the cyclical volatility of vacancies and unemployment.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11888.

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Date of creation: Dec 2005
Date of revision:
Publication status: published as Robert Shimer, 2006. "Mismatch," Proceedings, Federal Reserve Bank of San Francisco.
Handle: RePEc:nbr:nberwo:11888
Note: EFG LS
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