Shimer, Robert. 2007. "Mismatch."
American Economic Review,
This paper develops a dynamic model of mismatch. Workers and jobs are randomly
allocated to labor markets. Each market clears, but some have excess (unemployed)
workers and some have excess (vacant) jobs. As workers and jobs switch markets,
unemployed workers find vacancies and employed workers become unemployed.
The model is quantitatively consistent with the business cycle frequency comovement
of unemployment, vacancies, and the job finding rate and explains much of
these variables' volatility. It can also address cyclicality in the separation rate into
unemployment and duration dependence in the job finding rate. The results are
robust to some nonrandom mobility. (JEL E24, J41, J63, J64)
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