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The response of employment and wages to aggregate shocks: On-the-job search effect

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  • Coles, Melvyn G.
  • Mortensen, Dale T.

Abstract

The purpose of the paper is to study and quantify the possible importance of on-the-job for the fluctuations in the job finding rate within an alternative market equilibrium framework to that of the Diamond–Mortensen–Pissarides model recently introduced by Coles and Mortensen (2013). In the process we show that the Coles–Mortensen model can easily explain the magnitudes of worker flow fluctuation reported by Shimer (2005) for the 50 year post WWII period in the U.S. as well as the observed real wage rigidity.

Suggested Citation

  • Coles, Melvyn G. & Mortensen, Dale T., 2015. "The response of employment and wages to aggregate shocks: On-the-job search effect," Research in Economics, Elsevier, vol. 69(1), pages 7-17.
    • Handle: RePEc:eee:reecon:v:69:y:2015:i:1:p:7-17
    DOI: 10.1016/j.rie.2013.10.005
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    References listed on IDEAS

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    1. Yashiv, Eran, 2006. "Evaluating the performance of the search and matching model," European Economic Review, Elsevier, vol. 50(4), pages 909-936, May.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    3. Luca Sala & Ulf Söderström & Antonella Trigari, 2013. "Structural and Cyclical Forces in the Labor Market during the Great Recession: Cross-Country Evidence," NBER International Seminar on Macroeconomics, University of Chicago Press, vol. 9(1), pages 345-404.
    4. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
    5. Robert E. Hall, 2006. "The labor market and macro volatility: a nonstationary general-equilibrium analysis," Proceedings, Federal Reserve Bank of San Francisco.
    6. Monika Merz & Eran Yashiv, 2007. "Labor and the Market Value of the Firm," American Economic Review, American Economic Association, vol. 97(4), pages 1419-1431, September.
    7. Robert E. Hall & Paul R. Milgrom, 2008. "The Limited Influence of Unemployment on the Wage Bargain," American Economic Review, American Economic Association, vol. 98(4), pages 1653-1674, September.
    8. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    9. Robert E. Hall, 2005. "Employment Fluctuations with Equilibrium Wage Stickiness," American Economic Review, American Economic Association, vol. 95(1), pages 50-65, March.
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    Cited by:

    1. Tsasa, Jean-Paul K., 2022. "Labor market volatility in a fully specified RBC search model: An analytical investigation," Journal of Mathematical Economics, Elsevier, vol. 103(C).
    2. Pissarides, Christopher A., 2015. "Dale Mortensen: An appreciation," Research in Economics, Elsevier, vol. 69(1), pages 1-6.
    3. Etro, Federico, 2017. "Research in economics and macroeconomics," Research in Economics, Elsevier, vol. 71(3), pages 373-383.

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