Working Paper: NBER ID: w13115
Authors: Russell Cooper; John Haltiwanger; Jonathan L. Willis
Abstract: This paper studies hours, employment, vacancies and unemployment at micro and macro levels. It is built around a set of facts concerning the variability of unemployment and vacancies in the aggregate and, at the establishment level, the distribution of net employment growth and the comovement of hours and employment growth. A search model with frictions in hiring and firing is used as a framework to understand these observations. Notable features of this search model include non-convex costs of posting vacancies, establishment level profitability shocks and a contracting framework that determines the response of hours and wages to shocks. The search friction creates an endogenous, cyclical adjustment cost. We specify and estimate the parameters of the search model using simulated method of moments to match establishment-level and aggregate observations. The estimated search model is able to capture both the aggregate and establishment-level facts.
Keywords: search frictions; labor market; vacancies; unemployment; employment dynamics
JEL Codes: E24; J6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| labor market frictions (J29) | unemployment dynamics (J64) |
| labor market frictions (J29) | vacancies dynamics (J60) |
| unemployment dynamics (J64) | vacancies dynamics (J60) |
| idiosyncratic shocks (D89) | employment adjustments (J63) |
| hiring and firing costs (J63) | employment adjustments (J63) |
| aggregate shocks (E10) | employment adjustments (J63) |
| establishment-level shocks (E32) | employment adjustments (J63) |
| cyclical movements in average wages (J31) | labor market dynamics (J29) |
| labor market frictions (J29) | average labor productivity (J24) |