1994/07/01 by Dale T. Mortensen, D. T. Mortensen, C. A. Pissarides +1 · 2 citations
Economics, Econometrics and Finance · Social Sciences · #Labor market dynamics and wage inequality #Economic theories and models #Political Economy and Marxism
paper · doi:10.2307/2297896
In this paper, the authors model a job-specific shock process in the matching model of unemployment with noncooperative wage behavior. They obtain endogenous job creation and job destruction processes and study their properties. The authors show that an aggregate shock induces negative correlation between job creation and job destruction, whereas a dispersion shock induces positive correlation. The job destruction process is shown to have more volatile dynamics than the job creation process. In simulations, the authors show that an aggregate shock process proxies reasonably well the cyclical behavior of job creation and job destruction in the United States. Copyright 1994 by The Review of Economic Studies Limited.