On-the-Job Search and the Cyclical Dynamics of the Labor Market
CentER Discussion Paper No. 2004-92
46 Pages Posted: 11 Nov 2004
Date Written: July 2007
We show how on-the-job search and the propagation of shocks to the economy are intricately linked. Rising search by employed workers in a boom amplifies the incentives of firms to post vacancies. In turn, more vacancies increases job search. By keeping job creation costs low for firms, on-the-job search greatly amplifies shocks. In our baseline calibration, this allows the model to generate fluctuations of unemployment, vacancies, and labor productivity whose magnitudes are lose to the data, and leads output to be highly autocorrelated.
Keywords: Search and matching, job-to-job mobility, worker flows, Beveridge curve, business cycle, propagation
JEL Classification: E24, E32, J64
Suggested Citation: Suggested Citation