The Aggregate Matching Function

56 Pages Posted: 14 Nov 2007 Last revised: 8 Sep 2010

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Peter A. Diamond

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER); CESifo (Center for Economic Studies and Ifo Institute)

Date Written: November 1989

Abstract

We present a picture of the labor market, one with large flows of jobs and workers, and matching. We develop a consistent approach to the interaction among those flows and the stocks of unemployed workers and vacant jobs, and to the determination of wages. We estimate the matching function, using both aggregate data and data from manufacturing and find evidence of a stable matching process in the data. We examine the joint movements in unemployment, vacancies and wages -the Beveridge and Phillips curve relations- in the light of our model. We conclude that aggregate activity shocks rather than reallocation shocks dominate the movement of unemployment.

Suggested Citation

Blanchard, Olivier J. and Diamond, Peter A., The Aggregate Matching Function (November 1989). NBER Working Paper No. w3175. Available at SSRN: https://ssrn.com/abstract=467626

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Peter G. Peterson Institute for International Economics ( email )

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Peter A. Diamond

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-344
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617-253-3363 (Phone)
617-253-7804 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
617-253-3363 (Phone)
617-253-7804 (Fax)

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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