Heterogeneity and Cyclical Unemployment

37 Pages Posted: 21 Jul 2009 Last revised: 11 Aug 2009

See all articles by Mark Bils

Mark Bils

University of Rochester - Department of Economics; National Bureau of Economic Research (NBER)

Yongsung Chang

University of Rochester - Department of Economics; Yonsei University - Department of Economics

Sun-Bin Kim

Concordia University, Quebec - Department of Economics

Date Written: July 2009

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.

Suggested Citation

Bils, Mark and Chang, Yongsung and Kim, Sun-Bin, Heterogeneity and Cyclical Unemployment (July 2009). NBER Working Paper No. w15166. Available at SSRN: https://ssrn.com/abstract=1435624

Mark Bils (Contact Author)

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627-0158
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Yongsung Chang

University of Rochester - Department of Economics ( email )

Harkness Hall
Rochester, NY 14627
United States

Yonsei University - Department of Economics ( email )

50 Yonsei-Ro
Seoul, 120-749
Korea

Sun-Bin Kim

Concordia University, Quebec - Department of Economics ( email )

1455 de Maisonneuve Blvd., W.
Montreal, Quebec H3G 1MB
Canada
514-848-3923 (Phone)

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