Labor Market Matching Under Imperfect Information

Tinbergen Institute Discussion Paper 10-098/2

21 Pages Posted: 3 Oct 2010 Last revised: 19 May 2011

See all articles by Tim Willems

Tim Willems

University of Oxford - Nuffield Department of Medicine

Date Written: May 13, 2011

Abstract

Recent research has shown that the standard labor matching model has difficulties in reproducing the co-movement patterns observed in US data. This is due to the fact that the standard model lacks sufficient propagation of shocks. This paper shows that refining the informational structure of the model leads to improvements along this dimension: when agents cannot separately identify persistent and transitory technology shocks on impact (so that they must solve a signal extraction problem), shocks are propagated. Under this specification the standard matching model even manages to make recoveries initially jobless, as in the data.

Keywords: Imperfect Information, Labor Market Matching, Signal Extraction, Jobless Growth

JEL Classification: D80, E32, J63, J64

Suggested Citation

Willems, Tim, Labor Market Matching Under Imperfect Information (May 13, 2011). Tinbergen Institute Discussion Paper 10-098/2, Available at SSRN: https://ssrn.com/abstract=1685172 or http://dx.doi.org/10.2139/ssrn.1685172

Tim Willems (Contact Author)

University of Oxford - Nuffield Department of Medicine ( email )

New Road
Oxford, OX1 1NF
United Kingdom

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