Hours and Employment Implications of Search Frictions: Matching Aggregate and Establishment-Level Observations

Federal Reserve Bank of Kansas City Working Paper No. 06-14

40 Pages Posted: 28 Dec 2006

See all articles by Jonathan L. Willis

Jonathan L. Willis

Federal Reserve Bank of Kansas City

John Haltiwanger

University of Maryland - Department of Economics; National Bureau of Economic Research (NBER); Institute for the Study of Labor (IZA)

Russell Cooper

University of Texas at Austin - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2006

Abstract

This paper studies worker and job flows at the establishment and aggregate levels. The paper is built around a set of facts concerning the variability of unemployment and vacancies in the aggregate, the distribution of net employment growth and the comovement of hours and employment growth at the establishment level. A search model with frictions in hiring and firing is used as a framework to understand these observations. Notable features of this search model include non-convex costs of posting vacancies, establishment level profitability shocks and a contracting framework that determines the response of hours and wages to shocks. We specify and estimate the parameters of the search model using simulated method of moments to match establishment-level and aggregate observations.

Keywords: Labor search, adjustment costs, employment

JEL Classification: E24, J23, J64

Suggested Citation

Willis, Jonathan and Haltiwanger, John C. and Cooper, Russell W., Hours and Employment Implications of Search Frictions: Matching Aggregate and Establishment-Level Observations (December 2006). Available at SSRN: https://ssrn.com/abstract=953953 or http://dx.doi.org/10.2139/ssrn.953953

Jonathan Willis (Contact Author)

Federal Reserve Bank of Kansas City ( email )

1 Memorial Dr.
Kansas City, MO 64198
United States
816-881-2852 (Phone)
816-881-2199 (Fax)

John C. Haltiwanger

University of Maryland - Department of Economics ( email )

College Park, MD 20742
United States
301-405-3504 (Phone)
301-405-3542 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Institute for the Study of Labor (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Russell W. Cooper

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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