The Aggregate Matching Function
Olivier J. Blanchard
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); International Monetary Fund (IMF)
Peter A. Diamond
Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute for Economic Research)
NBER Working Paper No. w3175
We present a picture of the labor market, one with large flows of jobs and workers, and matching. We develop a consistent approach to the interaction among those flows and the stocks of unemployed workers and vacant jobs, and to the determination of wages. We estimate the matching function, using both aggregate data and data from manufacturing and find evidence of a stable matching process in the data. We examine the joint movements in unemployment, vacancies and wages -the Beveridge and Phillips curve relations- in the light of our model. We conclude that aggregate activity shocks rather than reallocation shocks dominate the movement of unemployment.
Number of Pages in PDF File: 56working papers series
Date posted: November 14, 2007
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