Shimer (2005a) argues that the simplest equilibrium search model of unemployment explains less than 10% of the volatility in vacancies, unemployment, and the job-Þnding rate when ßuctuations are driven by productivity shocks. His paper as well as other recent works inspired by it are reviewed and extended here. Although there may be excessive feedback from the job-Þnding rate to the wage built into the model, we argue that he and others overemphasize the need for wage rigidity to explain the data on labormarket ßuctuations. Indeed, the model matches the volatility of the jobÞnding rate if the opportunity cost of continuing a job-worker match is high enough, where this opportunity cost should include both worker's opportunity cost of employment and turnover costs. We also give a simple exposition of Nagypál's (2005) point that an extension of the model that accounts for job-destruction shocks and job-to-job ßows matches the volatility data for * Marcus Hagedorn, Robert Hall, John Kennan, Rasmus Lentz, Iourii Manovskii, Guido Menzio, and Robert Shimer have all provided valuable comments and suggestions.† Financial support from the National Science Foundation is acknowledged.1 reasonable parameter values when hiring costs are taken into account. Furthermore, we show that this extended model is consistent with the quantitative properties of the Beveridge curve in Shimer's data.

Shimer (2005a) argues that the simplest equilibrium search model of unemployment explains less than 10% of the volatility in vacancies, unemployment, and the job-Þnding rate when ßuctuations are driven by productivity shocks. His paper as well as other recent works inspired by it are reviewed and extended here. Although there may be excessive feedback from the job-Þnding rate to the wage built into the model, we argue that he and others overemphasize the need for wage rigidity to explain the data on labormarket ßuctuations. Indeed, the model matches the volatility of the jobÞnding rate if the opportunity cost of continuing a job-worker match is high enough, where this opportunity cost should include both worker's opportunity cost of employment and turnover costs. We also give a simple exposition of Nagypál's (2005) point that an extension of the model that accounts for job-destruction shocks and job-to-job ßows matches the volatility data for * Marcus Hagedorn, Robert Hall, John Kennan, Rasmus Lentz, Iourii Manovskii, Guido Menzio, and Robert Shimer have all provided valuable comments and suggestions.† Financial support from the National Science Foundation is acknowledged.1 reasonable parameter values when hiring costs are taken into account. Furthermore, we show that this extended model is consistent with the quantitative properties of the Beveridge curve in Shimer's data.

Understanding the accumulation of match-specific capital is crucial in shedding light on the reasons for the prevalence of long-term employment relationships and on the welfare consequences of turnover in the labour market. One of the most important sources of match-specific capital is human capital acquired through match-specific learning. Such learning can take on two distinct forms. In the first case, workers accumulate match-specific human capital through learning by doing. In the second case, a worker and a firm in an employment relationship learn about the quality of the match over time, thereby acquiring valuable information. I construct a structural model that embeds these two learning explanations and show that it is possible to distinguish the two by using turnover data on employing firms coupled with data on workers. I use a French matched employer-employee data-set to estimate the structural model using the Efficient Method of Moments, a simulation-based estimation method. I find that, while learning by doing may be present during the first six months of an employment relationship, learning about match quality dominates at longer tenures. This finding has important consequences for the understanding of the sources of match-specific capital and for the desirability of policies that alter the incentives for turnover for workers of different tenure. Copyright 2007 The Review of Economic Studies Limited.

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This publication primarily presents economic research aimed at improving policymaking by the Federal Reserve System and other governmental authorities.

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 reconciling the model with observed fluctuations in the unemployment rate, but not with those in the vacancy rate. Copyright The editors of the "Scandinavian Journal of Economics" 2008 .

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We use establishment data from the Job Openings and Labor Turnover Survey (JOLTS) to study the micro-level behavior of worker quits and their relation to recruitment and establishment growth. We …nd that quits decline with establishment growth, playing the most important role at slowly contracting …rms. We also …nd a robust, positive relationship between an establishment's reported hires and vacancies and the incidence of a quit. This relationship occurs despite the …nding that quits decline, and hires and vacancies increase, with establishment growth. We characterize these dynamics within a labor-market search model with on-the-job search, a convex cost of creating new positions, and multi-worker establishments. The model distinguishes between recruiting to replace a quitting worker and recruiting for a new position, and relates this distinction to …rm performance. Beyond giving rise to a varying quit propensity, the model generates endogenously-determined thresholds for …rm contraction (through both layo¤s and attrition), worker replacement, and …rm expansion. The continuum of decision rules derived from these thresholds produces rich …rm-level dynamics and quit behavior that are broadly consistent with the empirical evidence of the JOLTS data.