Working Paper: NBER ID: w11888
Authors: Robert Shimer
Abstract: This paper develops a dynamic model of mismatch. Workers and jobs are randomly assigned to labor markets. Each labor market clears at each instant but some labor markets have more workers than jobs, hence unemployment, and some have more jobs than workers, hence vacancies. As workers and jobs move between labor markets, some unemployed workers find vacant jobs and some employed workers lose or leave their job and become unemployed. The model is quantitatively consistent with the comovement of unemployment, job vacancies, and the rate at which unemployed workers find jobs over the business cycle. It can also address a variety of labor market phenomena, including duration dependence in the job finding probability and employer-to-employer transitions, and it helps explain the cyclical volatility of vacancies and unemployment.
Keywords: No keywords provided
JEL Codes: E24; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Mismatch between skills and geographical locations of unemployed workers and job openings (J69) | Negative correlation between unemployment and vacancies (J60) |
| Productivity shocks (O49) | Number of jobs per market (J40) |
| Number of jobs per market (J40) | Unemployment (J64) |
| Number of jobs per market (J40) | Vacancies (J63) |
| VU ratio (C29) | Job finding rate (J68) |
| 10% increase in VU ratio (C29) | 2% increase in job finding rate (J68) |