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Labor-market Volatility in a Matching Model with Worker Heterogeneity and Endogenous Separations

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  • Andri Chassamboulli

Abstract

Recessions are times when the quality of the unemployment pool is lower, because entry into unemployment is biased in favor of low-productivity workers. I develop a search and matching model with worker heterogeneity and endogenous separations that has this feature. I show that in a recession a compositional shift in unemployment towards low-productivity workers, due an increase in job separations, lowers the matching effectiveness of searching firms, thereby causing their average recruiting cost to rise. This acts to further depress vacancy creation in a recession. In contrast to most models that allow for endogenous separations, this model generates a realistic Beveridge curve correlation.

Suggested Citation

  • Andri Chassamboulli, 2010. "Labor-market Volatility in a Matching Model with Worker Heterogeneity and Endogenous Separations," University of Cyprus Working Papers in Economics 13-2010, University of Cyprus Department of Economics.
  • Handle: RePEc:ucy:cypeua:13-2010
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    References listed on IDEAS

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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Labor-market Volatility in a Matching Model with Worker Heterogeneity and Endogenous Separations
      by Christian Zimmermann in NEP-DGE blog on 2011-01-10 10:01:10

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    Cited by:

    1. Lalé, Etienne, 2018. "Loss of skill and labor market fluctuations," Labour Economics, Elsevier, vol. 50(C), pages 20-31.
    2. Adjemian, Stéphane & Karamé, Frédéric & Langot, François, 2021. "Nonlinearities and Workers' Heterogeneity in Unemployment Dynamics," IZA Discussion Papers 14822, Institute of Labor Economics (IZA).
    3. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    4. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    5. Carlo Gianelle & Giuseppe Tattara, 2014. "Vacancy chains and the business cycle. Stringing together job-to-job transitions in micro data," International Journal of Manpower, Emerald Group Publishing, vol. 35(8), pages 1212-1235, October.
    6. Ortego-Marti, Victor, 2017. "The Cyclical Behavior Of Unemployment And Vacancies With Loss Of Skills During Unemployment," Macroeconomic Dynamics, Cambridge University Press, vol. 21(6), pages 1277-1304, September.
    7. Wolcott, Erin L., 2021. "Employment inequality: Why do the low-skilled work less now?," Journal of Monetary Economics, Elsevier, vol. 118(C), pages 161-177.
    8. Julien Albertini & Arthur Poirier, 2014. "Discount Factor Shocks and Labor Market Dynamics," SFB 649 Discussion Papers SFB649DP2014-033, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    9. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.

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    More about this item

    Keywords

    search and matching; endogenous separations; worker heterogeneity; un-employment; vacancies volatility;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • 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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