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American Economic Journal: Macroeconomics: Vol. 3 No. 1 (January 2011)

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Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations

Article Citation

Bils, Mark, Yongsung Chang, and Sun-Bin Kim. 2011. "Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations." American Economic Journal: Macroeconomics, 3(1): 128-54.

DOI: 10.1257/mac.3.1.128

Abstract

We model worker heterogeneity in the rents from being employed in a Diamond-Mortensen-Pissarides model of matching and unemployment. We show that heterogeneity, reflecting differences in match quality and worker assets, reduces the extent of fluctuations in separations and unemployment. We find that the model faces a trade-off—it cannot produce both realistic dispersion in wage growth across workers and realistic cyclical fluctuations in unemployment. (JEL D31, E24, E32, J41, J63)

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Authors

Bils, Mark (U Rochester)
Chang, Yongsung (U Rochester and Yonsei U)
Kim, Sun-Bin (Yonsei U)

JEL Classifications

D31: Personal Income, Wealth, and Their Distributions
E24: Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
E32: Business Fluctuations; Cycles
J41: Labor Contracts
J63: Labor Turnover; Vacancies; Layoffs

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American Economic Journal: Macroeconomics


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