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

Posted: 14 Jul 2021

See all articles by Michael U. Krause

Michael U. Krause

affiliation not provided to SSRN

Thomas Lubik

Federal Reserve Banks - Federal Reserve Bank of Richmond

Date Written: 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.

Suggested Citation

Krause, Michael U. and Lubik, Thomas, On-the-Job Search and the Cyclical Dynamics of the Labor Market (2010). FRB Richmond Working Paper No. 10-12, Available at SSRN: https://ssrn.com/abstract=3886213

Michael U. Krause (Contact Author)

affiliation not provided to SSRN

No Address Available

Thomas Lubik

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

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

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