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The Slow Job Recovery in a Macro Model of Search and Recruiting Intensity

Author

Listed:
  • Zheng Liu

    (Federal Reserve Bank of San Francisco)

  • Sylvain Leduc

    (Federal Reserve Bank of San Francisco)

Abstract

Despite steady declines in the unemployment rate and increases in the job openings rate after the Great Recession, the hiring rate in the United States has lagged behind. A significant gap remains between the actual job filling rate and that predicted from the standard labor search model. To examine the forces behind the slow job recovery, we generalize the standard labor search model to incorporate endogenous variations in search intensity and recruiting intensity. Our model features a vacancy creation cost, which implies that firms rely on variations in both the number of vacancies and recruiting intensity to respond to aggregate shocks, in contrast to the textbook model with costless vacancy creation and thus constant recruiting intensity. Cyclical variations in search and recruiting intensity drive a wedge into the matching function even absent exogenous changes in match efficiency. Our estimated model suggests that fluctuations in search and recruiting intensity help substantially bridge the gap between the actual and model-predicted job filling rates in the aftermath of the Great Recession.

Suggested Citation

  • Zheng Liu & Sylvain Leduc, 2016. "The Slow Job Recovery in a Macro Model of Search and Recruiting Intensity," 2016 Meeting Papers 1397, Society for Economic Dynamics.
  • Handle: RePEc:red:sed016:1397
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    References listed on IDEAS

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    1. Two papers on frictions in the business cycle
      by Christian Zimmermann in NEP-DGE blog on 2016-07-12 19:50:41

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    Cited by:

    1. Alessandro Gavazza & Simon Mongey & Giovanni L. Violante, 2018. "Aggregate Recruiting Intensity," American Economic Review, American Economic Association, vol. 108(8), pages 2088-2127, August.
    2. Ellington, Michael & Martin, Chris & Wang, Bingsong, 2021. "Search Frictions and Evolving Labour Market Dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 127(C).
    3. Wesselbaum, Dennis, 2019. "Jobless recoveries: The interaction between financial and search frictions," Journal of Macroeconomics, Elsevier, vol. 61(C), pages 1-1.

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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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