Specific Capital and Vintage Effects on the Dynamics of Unemployment and Vacancies
American Economic Review · 2010 · Volume 100 · Issue 3
Abstract
In a reasonably calibrated Mortensen and Pissarides matching model, shocks to average labor productivity can account for a small portion of the fluctuations in unemployment and vacancies (Shimer (2005)). I add heterogeneity in jobs (matches) with respect to the time the job is created in the form of different embodied technology levels. I also introduce specific capital that, once adapted for a match, has less value in another match. I show that the augmented model can account for fluctuations in unemployment and vacancies, and that specific capital is important to decreasing the volatility of the destruction rate of existing matches.
Keywords
Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital, Business Fluctuations, Cycles, Human Capital, Skills, Occupational Choice, Labor Productivity, Labor Contracts, Labor Turnover, Vacancies, Layoffs, Unemployment: Models, Duration, Incidence, and Job Search
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