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Heterogeneity, Job Creation and Unemployment Volatility

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  • Veronica Guerrieri

Abstract

In this paper, I explore the impact of match‐specific heterogeneity at the job creation margin on business cycle fluctuations. I show that this form of heterogeneity alone does not help to amplify labor market volatility, either under full or under asymmetric information. First, I show analytically that, under full information, heterogeneity has no first‐order effect on the response of unemployment and job creation to productivity, and actually tends to dampen the response of market tightness. Then, in a series of calibrations, I show that with both full and asymmetric information, the model delivers labor market volatilities close to the representative‐agent, full‐information benchmark.

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  • Veronica Guerrieri, 2007. "Heterogeneity, Job Creation and Unemployment Volatility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 667-693, December.
    • Handle: RePEc:bla:scandj:v:109:y:2007:i:4:p:667-693
    DOI: 10.1111/j.1467-9442.2007.00516.x
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    References listed on IDEAS

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    Cited by:

    1. Chassamboulli, Andri, 2013. "Labor-market volatility in a matching model with worker heterogeneity and endogenous separations," Labour Economics, Elsevier, vol. 24(C), pages 217-229.
    2. Snell, Andy & Stüber, Heiko & Thomas, Jonathan P., 2024. "Job security, asymmetric information, and wage rigidity," European Economic Review, Elsevier, vol. 161(C).
    3. Venky Venkateswaran, 2011. "Heterogeneous Information and Labor Market Fluctuations," 2011 Meeting Papers 1292, Society for Economic Dynamics.
    4. Sanjay K. Chugh & Christian Merkl, 2016. "Efficiency And Labor Market Dynamics In A Model Of Labor Selection," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 57(4), pages 1371-1404, November.
    5. Ravenna, Federico & Walsh, Carl, 2020. "Worker heterogeneity, selection, and employment dynamics in the face of aggregate demand and pandemic shocks," CEPR Discussion Papers 15043, C.E.P.R. Discussion Papers.
    6. Federico Ravenna & Carl E. Walsh, 2012. "Screening and Labor Market Flows in a Model with Heterogeneous Workers," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 44, pages 31-71, December.
    7. Federico Ravenna & Carl E. Walsh, 2022. "Worker Heterogeneity, Selection, and Unemployment Dynamics in a Pandemic," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(S1), pages 113-155, February.

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