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The Cyclical Behavior of Equilibrium Unemployment and Vacancies with . . . (2008)
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| Venue: | AMERICAN ECONOMIC REVIEW |
| Citations: | 256 - 14 self |
BibTeX
@MISC{Hagedorn08thecyclical,
author = {Marcus Hagedorn and Iourii Manovskii and Sergiy Stetsenko},
title = { The Cyclical Behavior of Equilibrium Unemployment and Vacancies with . . . },
year = {2008}
}
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Abstract
In this paper, we extend the basic Mortensen-Pissarides search and matching model along two dimensions. First, we allow for ex-ante heterogeneity between workers. Second, two technology shocks, neutral and investment-specific, are the driving forces of the economy. Specifically, we integrate the framework of Krusell, Ohanian, Ríos-Rull, and Violante (2000)- a production function with capital-skill complementarity and two skill-groups- into a business-cycle search and matching model. We calibrate the model extending the approach in Hagedorn and Manovskii (2006) and find that the model accounts well for the cyclical behavior of labor market variables in the aggregate and for each demographic group. We show that the response of unemployment to changes in taxes or unemployment insurance benefits is substantially reduced in the model with worker heterogeneity.
Keyphrases
cyclical behavior equilibrium unemployment labor market variable basic mortensen-pissarides search unemployment insurance benefit business-cycle search technology shock demographic group production function ex-ante heterogeneity worker heterogeneity capital-skill complementarity driving force
