Turbulence and Unemployment in a Job Matching Model

Haan, Wouter J. Den; Hæfke, Christian; Ramey, Garey

doi:10.1162/154247605775012897

Cited by 45 publications

(17 citation statements)

References 16 publications

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“…High‐skilled unemployment peaks before low‐skilled and goes below the steady state after five quarters. The low increase and eventual decrease in high‐skilled unemployment is consistent with the arguments expressed in den Haan, Haefke, and Ramey (2005). High‐skilled workers realize that if they become unemployed, they face the possibility of skill loss and a subsequent decrease in their probability of re‐employment.…”

Section: Resultssupporting

confidence: 81%

“…The reason why the skill loss mechanism does not appear to improve the performance of the model with no skill heterogeneity, in terms of the persistence of the responses to a monetary shock, seems to be the same as the arguments made in den Haan, Haefke, and Ramey (2005). The possibility of skill deterioration during unemployment makes high‐skilled workers more reluctant to separate in a recession driven by an increase in interest rates, and this prevents the loss of skill mechanism, and the lower re‐employment probability of low‐skill workers, to have a first‐order effect on the responses of the model variables.…”

Section: Discussionmentioning

confidence: 62%

“…The skill loss mechanism has been used in the turbulence literature to analyze the differences between the European and U.S. labor markets. In particular, Ljungqvist and Sargent (2004) and den Haan, Haefke, and Ramey (2005) study the extent to which an increase in workers' skill loss can account for the high increase in unemployment experienced in Europe during the 1980s. Though their conclusions differ, both agree on the importance of studying skill degradation for European countries.…”

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confidence: 99%

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Monetary Shocks in a Model with Skill Loss

Esteban‐Pretel¹,

Faraglia²

2010

J of Money Credit Banking

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Unemployment shows persistent and long-lasting responses to nominal and real shocks. Standard real business cycle models with search frictions but a homogeneous labor force are able to generate some volatility and persistence, but not enough to match the empirical evidence. Moreover, empirical studies emphasize the importance of the heterogeneity of the unemployment pool to fully understand unemployment dynamics. In particular, in most European countries the incidence of long-term unemployment is large and well known. One of the possible causes/consequences of long-term unemployment is the skill deterioration of the unemployment pool. In this paper, we introduce the skill loss mechanism, and therefore a heterogeneous labor force, in a New Keynesian framework with search frictions. Calibrating the model for the Spanish economy, we show that while the skill loss mechanism helps to explain the magnitude of the response of unemployment to monetary shocks, it does not improve the performance of the homogeneous worker model in terms of the persistence of the response, especially for short- and long-term unemployment. Copyright (c) 2010 The Ohio State University.

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Section: Resultssupporting

confidence: 81%

Section: Discussionmentioning

confidence: 62%

mentioning

confidence: 99%

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Monetary Shocks in a Model with Skill Loss

Esteban‐Pretel¹,

Faraglia²

2010

J of Money Credit Banking

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“…They also study the interaction between a mean‐preserving spread of the productivity distribution across skills, intended to capture skill‐biased technical change, and labour‐market policies, such as unemployment benefits and firing taxes. Finally, den Haan, Haefke and Ramey (2005) study the quantitative implications of interest rate shocks within a calibrated version of the traditional Mortensen–Pissarides framework with various labour‐market policies.…”

Section: Technology–policy Interactionmentioning

confidence: 99%

Technology?Policy Interaction in Frictional Labour-Markets

2007

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Does capital‐embodied technological change play an important role in shaping labour‐market outcomes? To address this question, we develop a model with vintage capital and search‐matching frictions where irreversible investment in new vintages of capital creates heterogeneity in productivity among firms, matched as well as vacant. We demonstrate that capital‐embodied technological change reduces labour demand and raises equilibrium unemployment and unemployment durations. In addition, the presence of labour‐market regulations (unemployment benefits, payroll taxes, and firing costs) exacerbates these effects. Thus, the model is qualitatively consistent with some key features of the European labour‐market experience relative to that of the U.S.: it features a sharper rise in unemployment and a sharper fall in the vacancy rate and the labour share. A calibrated version of our model suggests that this technology–policy interaction could explain a sizeable fraction of the observed differences between the U.S. and Europe.

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“…For the remaining parameters, we follow the calibration strategy of Ljungqvist and Sargent (, ) and den Haan et al. () . Specifically, we choose these parameters to match observations from the empirical life‐cycle earnings profile estimated by Murphy and Welch () and others.…”

Section: Numerical Resultsmentioning

confidence: 99%

Technological Learning and Labor Market Dynamics

Gervais

Jaimovich

Siu

et al. 2015

Int Economic Review

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The search-and-matching model of the labor market fails to match two important business cycle facts: (i) a high volatility of unemployment relative to labor productivity, and (ii) a mild correlation between these two variables. We address these shortcomings by focusing on technological learning-by-doing: the notion that it takes workers' time using a technology before reaching their full productive potential with it. We consider a novel source of business cycles, namely, fluctuations in the speed of technological learning, and show that a search-and-matching model featuring such shocks can account for both facts. Moreover, our model provides a new interpretation of recently discussed "news shocks."

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Turbulence and Unemployment in a Job Matching Model

Cited by 45 publications

References 16 publications

Monetary Shocks in a Model with Skill Loss

Monetary Shocks in a Model with Skill Loss

Technology?Policy Interaction in Frictional Labour-Markets

Technological Learning and Labor Market Dynamics

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