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The Aggregate Matching Function

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  • Olivier Jean Blanchard
  • Peter A. Diamond

Abstract

We present a picture of the labor market, one with large flows of jobs and workers, and matching. We develop a consistent approach to the interaction among those flows and the stocks of unemployed workers and vacant jobs, and to the determination of wages. We estimate the matching function, using both aggregate data and data from manufacturing and find evidence of a stable matching process in the data. We examine the joint movements in unemployment, vacancies and wages -the Beveridge and Phillips curve relations- in the light of our model. We conclude that aggregate activity shocks rather than reallocation shocks dominate the movement of unemployment.

Suggested Citation

  • Olivier Jean Blanchard & Peter A. Diamond, 1989. "The Aggregate Matching Function," NBER Working Papers 3175, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:3175
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