Employment Fluctuations in a Dual Labor Market

Labor Market Equilibrium with Public Employment

We develop and empirically test a labor market model with Public Employment Agencies (PEA) in order to understand why not all vacancies use the costless services provided by the PEA. We show that both the search market and the PEA can be active in equilibrium. In such an equilibrium, workers with a higher productivity have a higher chance of receiving a job offer and hence a higher value of sea...

Dual Labor Markets: A Theory of Labor Market Segmentation

Reference Dependence and Labor-Market Fluctuations∗

We incorporate reference-dependent worker behavior into a search-matching model of the labor market, in which firms have all the bargaining power and productivity follows a log-linear AR(1) process. Motivated by Akerlof (1982) and Bewley (1999), we assume that existing workers’ output falls stochastically from its normal level when their wage falls below a "reference point", which (following Kő...

Financial Shocks and Labor Market Fluctuations

This paper investigates the e¤ect of …nancial shocks using an estimated general equilibrium model that links the …rm’s ‡ows of …nancing with labor market variables. The results show that …nancial shocks have sizeable e¤ects on …nancial variables, vacancy posting, unemployment and wages. Shocks to the job destruction rate are important in describing ‡uctuations in output and unemployment. The an...

Heterogeneous Information and Labor Market Fluctuations∗

Idiosyncratic productivity shocks induce larger adjustments to hiring than aggregate shocks, because general equilibrium effects on search frictions and wages partially offset the latter. When firms cannot disentangle the two shocks, they attribute aggregate disturbances partly to idiosyncratic factors and to that extent, respond more aggressively. This translates into increased aggregate volat...