The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited
Marcus Hagedorn, Iourii Manovskii
American Economic Review · 2008 · Volume 98 · Issue 4
Abstract
Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We propose a new calibration strategy of the standard model that uses data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters –- the value of nonmarket activity and the bargaining weights. Our calibration implies that the model is consistent with the data. (JEL E24, E32, J31, J63, J64)
Keywords
Employment, Unemployment, Wages, Intergenerational Income Distribution, Business Fluctuations, Cycles, Wage Level and Structure, Wage Differentials, Labor Turnover, Vacancies, Layoffs, Unemployment: Models, Duration, Incidence, and Job Search
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