Worker Flows and Job Flows: A Quantitative Investigation

43 Pages Posted: 1 Oct 2009 Last revised: 27 Nov 2009

See all articles by Shigeru Fujita

Shigeru Fujita

Federal Reserve Bank of Philadelphia

Makoto Nakajima

Federal Reserve Bank of Philadelphia

Multiple version iconThere are 4 versions of this paper

Date Written: November 25, 2009

Abstract

Worker flows and job flows behave differently over the business cycle. We investigate the sources of the differences by studying quantitative properties of a multiple-worker version of the search/matching model that features endogenous job separation and intra-firm wage bargaining. Our calibration incorporates micro- and macro-level evidence on worker and job flows. We show that the dynamic stochastic equilibrium of the model replicates important cyclical features of worker flows and job flows simultaneously. In particular, the model correctly predicts that hires from unemployment move countercyclically while the job creation rate moves procyclically. The key to this result is to allow for a large hiring flow that does not go through unemployment but is part of job creation, for which procyclicality of the job finding rate dominates its cyclicality. We also show that the model generates large volatilities of unemployment and vacancies when a worker's outside option is at 83% of aggregate labor productivity.

Keywords: Job flows, worker flows, search and matching, business cycles, unemployment, vacancies

JEL Classification: E24, E32, J63, J64

Suggested Citation

Fujita, Shigeru and Nakajima, Makoto, Worker Flows and Job Flows: A Quantitative Investigation (November 25, 2009). Available at SSRN: https://ssrn.com/abstract=1480790 or http://dx.doi.org/10.2139/ssrn.1480790

Shigeru Fujita

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Makoto Nakajima (Contact Author)

Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

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