A new GLO Discussion Paper studies the role of long-term vacancies in a Diamond-Mortensen-Pissarides style search and matching model calibrated to the US economy and identifies a vacancy depletion channel.
The Global Labor Organization (GLO) is an independent, non-partisan and non-governmental organization that functions as an international network and virtual platform to stimulate global research, debate and collaboration.
GLO Discussion Paper No. 654, 2020
GLO Fellow Christian Haefke
Author Abstract: We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. In the absence of free entry long lived vacancies and endogenous separations give rise to a vacancy depletion channel which we identify via joint unemployment and vacancy dynamics. We show conditions for constrained efficiency and discuss important implications of vacancy longevity for modeling and calibration, in particular regarding match cyclicality and wages. When calibrated to the postwar US economy, the model explains not only standard deviations and autocorrelations of labor market variables, but also their dynamic correlations with only one shock.
Featured image: Photo-by-Mika-Baumeister-on-Unsplash
GLO Discussion Papers are research and policy papers of the GLO Network which are widely circulated to encourage discussion. Provided in cooperation with EconStor, a service of the ZBW – Leibniz Information Centre for Economics, GLO Discussion Papers are among others listed in RePEc (see IDEAS, EconPapers). Complete list of all GLO DPs – downloadable for free.