Labor-market Volatility in Matching Models with Endogenous Separations

Dale Mortensen, Éva Nagypál
2007 The Scandinavian Journal of Economics  
The business-cycle behavior of a matching model with endogenous separations is studied in this paper. We show that whether aggregate productivity shocks have a larger effect on the vacancy-unemployment ratio than in a model with exogenous separations depends on whether worker productivity stochastically increases with tenure. The difference in the response is quantitatively small, however. We also show that the cleansing effect introduced by allowing for endogenous separations can help in
more » ... iling the model with observed fluctuations in the unemployment rate, but not with those in the vacancy rate.
doi:10.1111/j.1467-9442.2007.00515.x fatcat:iyb655r6yrclzaduodgh66lidy