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A frictionless model of job flows and the Beveridge Curve

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  • Reicher, Christopher Phillip

Abstract

The Diamond-Mortensen-Pissarides search and matching model is the workhorse of labor macro, but it has difficulty in simultaneously matching the cyclical behavior of job loss and vacancies when taken to the data. By completely ignoring frictions in job creation and focusing instead on firm-level heterogeneity, one can match the cyclical behavior of job flows and vacancies relatively well. In particular, one can generate a Beveridge Curve which looks much like the real Beveridge Curve, and one can replicate the approximately equal contributions of job creation and destruction to the cycle. Focusing on heterogeneity rather than on hiring costs seems to give an improved picture of hiring activity over the cycle.

Suggested Citation

  • Reicher, Christopher Phillip, 2010. "A frictionless model of job flows and the Beveridge Curve," Kiel Working Papers 1636, Kiel Institute for the World Economy.
    • Handle: RePEc:zbw:ifwkwp:1636
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    References listed on IDEAS

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    1. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2009. "Defending Gibrat’s Law as a long-run regularity," Small Business Economics, Springer, vol. 32(1), pages 31-44, January.
    2. Francesca Lotti & Enrico Santarelli & Marco Vivarelli, 2003. "Does Gibrat's Law hold among young, small firms?," Journal of Evolutionary Economics, Springer, vol. 13(3), pages 213-235, August.
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    Cited by:

    1. Chassamboulli, Andri, 2013. "Labor-market volatility in a matching model with worker heterogeneity and endogenous separations," Labour Economics, Elsevier, vol. 24(C), pages 217-229.

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    More about this item

    JEL classification:

    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure

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