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Cyclical Behavior of a Matching Model with Capital Investment

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  • Miyamoto Hiroaki

    (International University of Japan)

Abstract

This paper studies the role of capital investment in a search and matching model. I develop an endogenous job separation matching model in which a firm's capital investment decision is endogenously determined. The incorporation of capital investment provides an additional channel for firms to respond to productivity shocks, significantly magnifying labor market fluctuations. The numerical results demonstrate that the incorporation of capital investment improves the ability of the standard search and matching model to generate cyclical fluctuations of unemployment and vacancies in response to productivity shocks. Moreover, my model can generate the pro-cyclicality of vacancies, which the standard endogenous separation models often fail to generate.

Suggested Citation

  • Miyamoto Hiroaki, 2011. "Cyclical Behavior of a Matching Model with Capital Investment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-25, January.
    • Handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:2
    DOI: 10.2202/1935-1690.1940
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    Cited by:

    1. Kudoh, Noritaka & Miyamoto, Hiroaki, 2023. "Do general equilibrium effects matter for labor market dynamics?," Economic Modelling, Elsevier, vol. 119(C).
    2. Noritaka Kudoh & Hiroaki Miyamoto, 2021. "General Equilibrium Effects and Labor Market Fluctuations," Working Papers SDES-2021-4, Kochi University of Technology, School of Economics and Management, revised May 2021.

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    More about this item

    Keywords

    search and matching model; volatility of unemployment and vacancies; business cycle; capital investment;
    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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