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The Cyclical Behavior of Unemployment and Vacancies with Loss of Skills during Unemployment

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  • Victor Ortego-Marti

    (Department of Economics, University of California Riverside)

Abstract

This paper studies the cyclical fluctuations in unemployment and vacancies in a search and matching model in which workers lose skills during periods of unemployment. Firms' profits fluctuate more because aggregate productivity affects the economy's human capital level. Moreover, wages for workers with lower levels of human capital are closer to the value of non-market time, leading to more rigid wages. Fluctuations in the vacancy-unemployment ratio are larger than is the case in the baseline search and matching model. For mid-range values of non-market time the improvement is substantial, and the model accounts for most observed labor market fluctuations.

Suggested Citation

  • Victor Ortego-Marti, 2014. "The Cyclical Behavior of Unemployment and Vacancies with Loss of Skills during Unemployment," Working Papers 201416, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:201416
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    References listed on IDEAS

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    Cited by:

    1. Ortego-Marti, Victor, 2017. "Differences in skill loss during unemployment across industries and occupations," Economics Letters, Elsevier, vol. 161(C), pages 31-33.
    2. Lalé, Etienne, 2018. "Loss of skill and labor market fluctuations," Labour Economics, Elsevier, vol. 50(C), pages 20-31.
    3. Jackson, Paul & Ortego-Marti, Victor, 2024. "Skill loss during unemployment and the scarring effects of the COVID-19 pandemic," Labour Economics, Elsevier, vol. 88(C).

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    More about this item

    Keywords

    Search and Matching; Unemployment Fluctuations; Unemployment History; Human Capital Depreciation;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment

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