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Investment-Specific Shocks and Cyclical Fluctuations in a Frictional Labor Market

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  • Jose I. Silva

    (Universidad de Girona)

  • Manuel Toledo

    (Universidad Carlos III de Madrid)

Abstract

amplification mechanism in the labor market fluctuations. We first show evidence that suggests that when technological advances make equipment more expensive, not only investment and output decrease but also firms post fewer vacancies, hours worked are reduced and unemployment increases. Moreover, we study the quantitative impact of this type of shocks on the labor market by incorporating them into a Real Business Cycle model with search and matching frictions. We find that in our model these shocks have direct amplification effect on labor market fluctuations, increasing the volatility of the labor market variables between two and five times.

Suggested Citation

  • Jose I. Silva & Manuel Toledo, 2010. "Investment-Specific Shocks and Cyclical Fluctuations in a Frictional Labor Market," 2010 Meeting Papers 852, Society for Economic Dynamics.
  • Handle: RePEc:red:sed010:852
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    References listed on IDEAS

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    Cited by:

    1. Javier Ordóñez & Hector Sala & José I. Silva, 2011. "Oil Price Shocks and Labor Market Fluctuations," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3), pages 89-118.
    2. Faccini, Renato & Ortigueira, Salvador, 2010. "Labor-market volatility in the search-and-matching model: The role of investment-specific technology shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1509-1527, August.

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    More about this item

    JEL classification:

    • 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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