Silva, José Ignacio and Toledo, Manuel (2009): The Unemployment Volatility Puzzle: The Role of Matching Costs Revisited.
Download (139kB) | Preview
Recently, Pissarides (2008) has argued that the standard search model with sunk fixed matching costs increases unemployment volatility without introducing an unrealistic wage response in new matches. We revise the role of matching costs and show that when these costs are not sunk and, therefore, can be partially passed on to new hired workers in the form of lower wages, the amplication mechanism of fixed matching costs is considerably reduced and wages in new hired positions become more sensitive to productivity shocks.
|Item Type:||MPRA Paper|
|Original Title:||The Unemployment Volatility Puzzle: The Role of Matching Costs Revisited|
|Keywords:||unemployment volatility puzzle, search and matching, matching costs|
|Subjects:||E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles
J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits; Private Pensions
J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search
|Depositing User:||José Ignacio Silva|
|Date Deposited:||08. Oct 2009 13:51|
|Last Modified:||13. Feb 2013 15:13|
Barron, J. M., D., A. Black, and M., A. Loewenstein (1989). Job-Matching and On-the-Job Training, Journal of Labor Economics, 1, 1-19
Barron, J., M. Berger, and D. Black (1999a): Do Workers Pay for On-the-Job Training? Journal of Human Resources 34, 235-52.
Barron, J. (1999): Replacing General with Specific training: Why Restricting Alternatives Makes Sense, Research in Labor Economics 18, 281-302.
Barron, J. (1997): On-the-Job Training, W.E. Upjohn Institute for Employment Research.
Costain, J. S. and M. Reiter (2008): Business Cycles, Unemployment Insurance, and the Calibration of Matching Models, Journal of Economic Dynamics and Control, 32, 1120-1155.
Dolfin, S. (2006): An Examination of Firms Employment Costs, Applied Economics 38, 861-878.
Haefke, C., M. Sonntag, and T. van Rens. (2007): Wage Rigidity and Job Creation, Institute for the Study of Labor (IZA), Bonn, Discussion Paper 3714.
Hall, R. E. and P. Milgrom (2008): The Limited In.uence of Unemployment on the Wage Bargain, American Economic Review, 98, 1653-1674.
Holzer, H. (1990): The Determinants of Employee Productivity and Earnings, Industrial Relations, 29, 403-22.
Loewenstein, M., A. and J., R. Spletzer (1998): Dividing the Costs and Returns to General Training, Journal of Labor Economics, 16, 142-71.
Mortensen, D. T. and C. A. Pissarides (1994): Job Creation and Job Destruction in the Theory of Unemployment, Review of Economic Studies, 61, 397-415.
Petrongolo, B. and C. A. Pissarides (2001): Looking into the Black Box: A Survey of the Matching Function, Journal of Economic Literature, 39, 390-431.
Pissarides, C. A. (1985): Short-Run Equilibrium Dynamics of Unemployment, Vacancies, and Real Wages, American Economic Review, 75, 676-690.
Pissarides, C. A. (2000): Equilibrium Unemployment Theory, 2nd ed.,Cambridge, MA: MIT Press.
Pissarides, C. A. (2009): The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?, Econometrica, forthcoming.
Shimer, R. (2005): The Cyclical Behavior of Equilibrium Unemployment and Vacancies, American Economic Review, 95, 25-49.
Silva, J. and M. Toledo (2009): Labor Turnover Costs and the Cyclical Behavior of Vacancies and Unemployment, Macroeconomic Dynamics, 2009, Vol. 13, Supplement No. 1
Veum, J., R. (1999): Training, Wages, and the Human Capital Model, Southern Economic Journal, 65, 526-38.