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American Economic Review: Vol. 98 No. 4 (September 2008)

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The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited

Article Citation

Hagedorn, Marcus, and Iourii Manovskii. 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited." American Economic Review, 98(4): 1692-1706.

DOI: 10.1257/aer.98.4.1692

Abstract

Recently, a number of authors have argued that the standard search model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies, given shocks of a plausible magnitude. We propose a new calibration strategy of the standard model that uses data on the cost of vacancy creation and cyclicality of wages to identify the two key parameters –- the value of nonmarket activity and the bargaining weights. Our calibration implies that the model is consistent with the data. (JEL E24, E32, J31, J63, J64)

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Authors

Hagedorn, Marcus (Institute for Empirical Research, U Zurich)
Manovskii, Iourii (U PA)

JEL Classifications

E24: Employment; Unemployment; Wages; Intergenerational Income Distribution
E32: Business Fluctuations; Cycles
J31: Wage Level and Structure; Wage Differentials
J63: Labor Turnover; Vacancies; Layoffs
J64: Unemployment: Models, Duration, Incidence, and Job Search


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