More on Unemployment and Vacancy Fluctuations
نویسنده
چکیده
More on Unemployment and Vacancy Fluctuations Shimer (2005a) argues that the Mortensen-Pissarides equilibrium search model of unemployment grossly under predicts the size of the response in the job finding rate to a productivity shock. Some of the recent papers inspired by his critique are reviewed and commented on here. Specifically, I suggest that the problem is not procyclicality of the wage, as Shimer, Hall (2005), and Hall and Milgrom (2005) argue, or a failure to account fully for the opportunity cost of employment, as Hagedorn and Manovskii (2005) contend. Instead, I show that a properly calibrated variant of the model, one that accounts for capital cost, counter cyclic involuntary separations, and the large flow of workers from job-to-job, can explain the observed volatility of the job finding rate. JEL Classification: E24, E32, J41, J63, J64
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