Hostname: page-component-cd9895bd7-dk4vv Total loading time: 0 Render date: 2024-12-26T21:17:49.258Z Has data issue: false hasContentIssue false
  • English
  • Français

THE CYCLICAL BEHAVIOR OF UNEMPLOYMENT AND VACANCIES WITH LOSS OF SKILLS DURING UNEMPLOYMENT

Published online by Cambridge University Press:  22 April 2016

Victor Ortego-Marti
Victor Ortego-Marti*
Affiliation:
University of California, Riverside
*
Address correspondence to: Victor Ortego-Marti, Department of Economics, University of California, Riverside, Sproul Hall 3132, Riverside, CA 92521, USA; e-mail: [email protected].
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper studies the cyclical fluctuations in unemployment and vacancies in a search and matching model in which workers lose skills during periods of unemployment. Firms' profits fluctuate more because aggregate productivity affects the economy's average human capital. Moreover, wages for workers with lower levels of human capital are closer to the value of nonmarket time, leading to more rigid wages. Fluctuations in the vacancy--unemployment ratio are larger than those in the baseline search and matching model and similar to those we observe in the data.

Type
Articles
Information
Macroeconomic Dynamics , Volume 21 , Issue 6 , September 2017 , pp. 1277 - 1304
Copyright
Copyright © Cambridge University Press 2016 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I am grateful to the Associate Editor, two anonymous referees, Marcelle Chauvet, Yu-Chin Chen, Russell Cooper, Joel David, Jang-Ting Guo, Urmee Khan, Pete Klenow, David Lagakos, David Malueg, Vincenzo Quadrini, Xavier Raurich, Guillaume Rocheteau, Richard Suen, Stephen Turnovsky, Gianluca Violante, Carl Walsh, Joel Watson, Randall Wright, and Alwyn Young for invaluable comments and suggestions. I also benefited from helpful discussions with seminar participants at UC Riverside and the 15th Annual Meeting of the Association for Public Economic Theory at the University of Washington.

References

REFERENCES

Andolfatto, David (1996) Business cycles and labor-market search. American Economic Review 86 (1), 112–132.Google Scholar
Beauchemin, Kenneth and Tasci, Murat (2014) Diagnosing labor market search models: A multiple-shock approach. Macroeconomic Dynamics 18 (3), 548–572.Google Scholar
Bils, Mark, Chang, Yongsung, and Kim, Sun-Bin (2011) Worker heterogeneity and endogenous separations in a matching model of unemployment fluctuations. American Economic Journal: Macroeconomics 3 (1), 128–154.Google Scholar
Bils, Mark, Chang, Yongsung, and Kim, Sun-Bin (2012) Comparative advantage and unemployment. Journal of Monetary Economics 59 (2), 150–165.CrossRefGoogle Scholar
Cardullo, Gabrielle and Guerrazzi, Marco (2013) The Cyclical Volatility of Equilibrium Unemployment and Vacancies: Evidence from Italy. Mimeo, University of Genoa.Google Scholar
Carrington, William J. (1993) Wage losses for displaced workers: Is it really the firm that matters? Journal of Human Resources 28 (3), 435–462.Google Scholar
Chassamboulli, Andri (2013) Labor-market volatility in a matching model with worker heterogeneity and endogenous separations. Labour Economics 24 (0), 217–229.CrossRefGoogle Scholar
Coles, Melvyn and Masters, Adrian (2000) Retraining and long-term unemployment in a model of unlearning by not doing. European Economic Review 44 (9), 1801–1822.Google Scholar
Costain, James S. and Reiter, Michael (2008) Business cycles, unemployment insurance, and the calibration of matching models. Journal of Economic Dynamics and Control 32 (4), 1120–1155.CrossRefGoogle Scholar
Couch, Kenneth A. and Placzek, Dana W. (2010) Earnings losses of displaced workers revisited. American Economic Review 100 (1), 572–589.CrossRefGoogle Scholar
Den Haan, Wouter J., Haefke, Christian, and Ramey, Garey (2005) Turbulence and unemployment in a job matching model. Journal of the European Economic Association 3 (6), 1360–1385.Google Scholar
Eyigungor, Burcu (2010) Specific capital and vintage effects on the dynamics of unemployment and vacancies. American Economic Review 100 (3), 1214–1237.CrossRefGoogle Scholar
Fallick, Bruce C. (1996) A review of the recent empirical literature on displaced workers. Industrial and Labor Relations Review 50 (1), 5–16.Google Scholar
Farber, Henry S. (1997) The changing face of job loss in the United States, 1981–1995. Brookings Papers on Economic Activity: Microeconomics, 55–128.Google Scholar
Fujita, Shigeru (2015) Declining Labor Turnover and Turbulence. Mimeo, Federal Reserve Bank of Philadelphia.Google Scholar
Garcia-Macia, Daniel, Hsieh, Chang-Tai, and Klenow, Pete (2015) How Destructive Is Innovation? Mimeo, Stanford University.CrossRefGoogle Scholar
Gertler, Mark and Trigari, Antonella (2009) Unemployment fluctuations with staggered Nash wage bargaining. Journal of Political Economy 117 (1), 38–86.CrossRefGoogle Scholar
Gomes, Joao, Greenwood, Jeremy, and Rebelo, Sergio (2001) Equilibrium unemployment. Journal of Monetary Economics 48 (1), 109–152.CrossRefGoogle Scholar
Hagedorn, Marcus and Manovskii, Iourii (2008) The cyclical behavior of equilibrium unemployment and vacancies revisited. American Economic Review 98 (4), 1692–1706.CrossRefGoogle Scholar
Hall, Robert E. (2005) Employment fluctuations with equilibrium wage stickiness. American Economic Review 95 (1), 50–65.Google Scholar
Hall, Robert E. and Milgrom, Paul R. (2008) The limited influence of unemployment on the wage bargain. American Economic Review 98 (4), 1653–1674.Google Scholar
Jacobson, Louis S., LaLonde, Robert J., and Sullivan, Daniel G. (1993) Earnings losses of displaced workers. American Economic Review 83 (4), 685–709.Google Scholar
Kennan, John (2010) Private information, wage bargaining and employment fluctuations. Review of Economic Studies 77 (2), 633–664.Google Scholar
Kletzer, Lori G. (1998) Job displacement. Journal of Economic Perspectives 12 (1), 115–136.Google Scholar
Kudlyak, Marianna (2014) The cyclicality of the user cost of labor. Journal of Monetary Economics 68, 53–67.Google Scholar
Ljungqvist, Lars and Sargent, Thomas J. (1998) The European unemployment dilemma. Journal of Political Economy 106 (3), 514–550.Google Scholar
Ljungqvist, Lars and Sargent, Thomas J. (2007) Understanding European unemployment with matching and search-island models. Journal of Monetary Economics 54 (8), 2139–2179.Google Scholar
Ljungqvist, Lars and Sargent, Thomas J. (2008) Two questions about European unemployment. Econometrica 76 (1), 1–29.CrossRefGoogle Scholar
Menzio, Guido (2005) High Frequency Wage Rigidity. Mimeo, University of Pennsylvania.Google Scholar
Merz, Monika (1995) Search in the labor market and the real business cycle. Journal of Monetary Economics 36 (2), 269–300.Google Scholar
Merz, Monika (1999) Heterogeneous job-matches and the cyclical behavior of labor turnover. Journal of Monetary Economics 43 (1), 91–124.Google Scholar
Mortensen, Dale T. and Nagypal, Eva (2007a) More on unemployment and vacancy fluctuations. Review of Economic Dynamics 10 (3), 327–347.Google Scholar
Mortensen, Dale T. and Nagypal, Eva (2007b) Labor-market volatility in matching models with endogenous separations. Scandinavian Journal of Economics 109 (4), 645–665.Google Scholar
Mortensen, Dale T. and Pissarides, Christopher A. (1994) Job creation and job destruction in the theory of unemployment. Review of Economic Studies 61 (0), 397–415.Google Scholar
Moyen, Stephane and Stahler, Nikolai (2014) Unemployment insurance and the business cycle: Should benefit entitlement duration react to the cycle? Macroeconomic Dynamics 18, 497–525.Google Scholar
Neal, Derek (1995) Industry-specific human capital: Evidence from displaced workers. Journal of Labor Economics 13 (4), 653–677.CrossRefGoogle Scholar
Ortego-Marti, Victor (2016) Unemployment history and frictional wage dispersion. Journal of Monetary Economics 78, 5–22.Google Scholar
Pavoni, Nicola (2009) Optimal unemployment insurance, with human capital depreciation, and duration dependence. International Economic Review 50 (2), 323–362.CrossRefGoogle Scholar
Pavoni, Nicola, Setty, Ofer, and Violante, Giovanni L. (2012) Search and Work in Optimal Welfare Programs. Mimeo, New York University.Google Scholar
Pavoni, Nicola and Violante, Giovanni L. (2007) Optimal welfare-to-work programs. Review of Economic Studies 74 (1), 283–318.Google Scholar
Petrongolo, Barbara and Pissarides, Christopher A. (2001) Looking into the black box: A survey of the matching function. Journal of Economic Literature 39 (2), 390–431.Google Scholar
Pissarides, Christopher A. (1992) Loss of skill during unemployment and the persistence of employment shocks. Quarterly Journal of Economics 107 (4), 1371–1391.Google Scholar
Pissarides, Christopher A. (2000) Equilibrium Unemployment Theory. Cambridge, MA: MIT Press.Google Scholar
Pissarides, Christopher A. (2009) The unemployment volatility puzzle: Is wage stickiness the answer? Econometrica 77 (5), 1339–1369.Google Scholar
Pries, Michael J. (2008) Worker heterogeneity and labor market volatility in matching models. Review of Economic Dynamics 11 (3), 664–678.Google Scholar
Rannenberg, Ansgar (2015) The Taylor principle and (in-)determinacy with hiring frictions and skill loss. Macroeconomic Dynamics 19, 1045–1073.Google Scholar
Rudanko, Leena (2011) Aggregate and idiosyncratic risk in a frictional labor market. American Economic Review 101 (6), 2823–2843.Google Scholar
Ruhm, Christopher J. (1991) Are workers permanently scarred by job displacements? American Economic Review 81 (1), 319–324.Google Scholar
Schoeni, Robert and Dardia, Michael (2003) Estimates of Earnings Losses of Displaced Workers Using California Administrative Data. University of Michigan Population Studies Center report 03–543.Google Scholar
Shimer, Robert (2005) The cyclical behavior of equilibrium unemployment and vacancies. American Economic Review 95 (1), 24–49.CrossRefGoogle Scholar
Shimer, Robert and Werning, Ivan (2006) On the Optimal Timing of Benefits with Heterogeneous Workers and Human Capital Depreciation. Mimeo, University of Chicago.Google Scholar
Silva, Jose I. and Toledo, Manuel (2009) Labor turnover costs and the cyclical behavior of vacancies and unemployment. Macroeconomic Dynamics 13, 76–96.CrossRefGoogle Scholar
Silva, Jose I. and Toledo, Manuel (2013) The unemployment volatility puzzle: The role of matching costs revisited. Economic Inquiry 51 (1), 836–843.Google Scholar
Stevens, Ann H. (1997) Persistent effects of job displacement: The importance of multiple job losses. Journal of Labor Economics 15 (1), 165–188.Google Scholar
Topel, Robert (1990) Specific capital and unemployment: Measuring the costs and consequences of job loss. Carnegie-Rochester Conference Series on Public Policy 33 (0), 181–214.Google Scholar
Von Wachter, Till, Song, Jae, and Manchester, Joyce (2009) Long-term earnings losses due to mass layoffs during the 1982 recession: An analysis using U.S. administrative data from 1974 to 2004. Mimeo, UCLA.Google Scholar