The Weak Job Recovery in a Macro Model of Search and Recruiting Intensity
- American Economic Journal: Macroeconomics (Forthcoming)
We show that cyclical fluctuations in search intensity and recruit- ing intensity are quantitatively important for explaining the weak job recovery from the Great Recession. We demonstrate this result using an estimated labor search model that features endogenous search and recruiting intensity. Since the textbook model with free entry implies constant recruiting intensity, we introduce a cost of vacancy creation, so that firms respond to aggregate shocks by ad- justing both vacancies and recruiting intensity. Fluctuations in search and recruiting intensity driven by shocks to productivity and the discount factor help bridge the gap between the actual and model-predicted job filling rate.
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