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Heterogeneity and Cyclical Unemployment

Author

Listed:
  • Mark Bils

    (University of Rochester and NBER)

  • Yongsung Chang

    (University of Rochester and Yonsei University)

  • Sun-Bin Kim

    (Department of Economics, Korea University)

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 wages across workers and realistic cyclical fluctuations in unemployment.

Suggested Citation

  • Mark Bils & Yongsung Chang & Sun-Bin Kim, 2008. "Heterogeneity and Cyclical Unemployment," Discussion Paper Series 0805, Institute of Economic Research, Korea University.
    • Handle: RePEc:iek:wpaper:0805
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    References listed on IDEAS

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    Cited by:

    1. Bils, Mark & Chang, Yongsung & Kim, Sun-Bin, 2012. "Comparative advantage and unemployment," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 150-165.
    2. Christian Bayer & Klaus Wälde, 2010. "Matching and Saving in Continuous Time: Theory," CESifo Working Paper Series 3026, CESifo.
    3. Kai Liu, 2010. "Wage Risk, On-the-job Search and Partial Insurance," 2010 Meeting Papers 1136, Society for Economic Dynamics.
    4. Per Krusell & Toshihiko Mukoyama & Ayşegül Şahin, 2010. "Labour-Market Matching with Precautionary Savings and Aggregate Fluctuations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 77(4), pages 1477-1507.

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    More about this item

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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