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Heterogeneity and Cyclical UnemploymentMark BilsUniversity of Rochester - Department of Economics; National Bureau of Economic Research (NBER) Yongsung ChangUniversity of Rochester - Department of Economics; Yonsei University - Department of Economics Sun-Bin KimConcordia University, Quebec - Department of Economics July 2009 NBER Working Paper No. w15166 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.
Number of Pages in PDF File: 37 working papers seriesDate posted: July 21, 2009Suggested CitationContact Information
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