Working Paper: NBER ID: w15166
Authors: Mark Bils; Yongsung Chang; Sunbin Kim
Abstract: We model worker heterogeneity in the rents from being employed in a Diamond-Mortensen-Pissarides model of matching and unemployment. We show that heterogeneity, reflecting differences in match quality and worker assets, reduces the extent of fluctuations in separations and unemployment. We find that the model faces a trade-off--it cannot produce both realistic dispersion in wage growth across workers and realistic cyclical fluctuations in unemployment.
Keywords: Cyclical Unemployment; Worker Heterogeneity; Match Quality
JEL Codes: E2; E32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| heterogeneity in match quality and worker assets (D29) | fluctuations in unemployment and job separations (J63) |
| lower savings among workers (J32) | willingness to separate from jobs (J63) |
| willingness to separate from jobs (J63) | overall unemployment fluctuations (J64) |
| shocks to match quality (L15) | unemployment cyclicality (J64) |
| distribution of rents from employment (D33) | understanding unemployment dynamics (J64) |
| calibrated model (C51) | separations and unemployment cyclicality (J65) |