On-the-Job Search and the Cyclical Dynamics of the Labor Market

41 Pages Posted: 16 Dec 2012

See all articles by Michael U. Krause

Michael U. Krause

University of Cologne

Thomas Lubik

Federal Reserve Banks - Federal Reserve Bank of Richmond

Multiple version iconThere are 3 versions of this paper

Date Written: June 1, 2010

Abstract

We develop a business cycle model with search and matching frictions in the labor market and show that on-the-job search generates substantial amplification and propagation. Rising search by employed workers in an expansion amplifies the incentives of firms to post vacancies. By keeping job creation costs low for firms, on-the-job search amplifies exogenous shocks. In our calibration, this allows the model to generate fluctuations of unemployment, vacancies, and job-to-job transitions whose magnitudes are close to the data, and leads output to be highly autocorrelated. On-the-job search implies higher-order serial correlation that is absent from the standard search and matching model.

Keywords: search and matching, job-to-job mobility, worker flows, Beveridge curve, business cycle, propagation

JEL Classification: E24, E32, J64

Suggested Citation

Krause, Michael U. and Lubik, Thomas, On-the-Job Search and the Cyclical Dynamics of the Labor Market (June 1, 2010). FRB Richmond Working Paper No. 10-12. Available at SSRN: https://ssrn.com/abstract=2189550 or http://dx.doi.org/10.2139/ssrn.2189550

Michael U. Krause

University of Cologne ( email )

Albertus-Magnus-Platz
Cologne, 50923
Germany

Thomas Lubik (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States

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