An estimated search and matching model of the Japanese labor market

Lin, Ching-Yang, and Miyamoto, Hiroaki—An estimated search and matching model of the Japanese labor market This paper studies how well a simple search and matching model can describe aggregate Japanese labor market dynamics in a full information setting. We develop a discrete-time search and matching model with a convex vacancy posting cost and three shocks: productivity, separation, and markup shocks. We use the model as a data-generating process for our empirical analysis and estimate it by using Bayesian methods. The model is successful in replicating the behavior of unemployment and vacancies in Japan. However, we also find that the success of the model relies on shock processes that are not empirically plausible. J. Japanese Int. Economies xxx (xx) (2014) xxx–xxx. International University of Japan, 777 Kokusai-cho, Minami Uonuma-shi, Niigata 949-7277, Japan. 2014 Elsevier Inc. All rights reserved.