Sector-specific productivity shocks in a matching model

► We develop a two-sector search and matching model for the U.S. economy. ► Our model with sectoral shocks can generate an aggregate Beveridge curve. ► The model performs reasonably well in replicating business cycle facts. ► Nominal rigidities and labor market frictions change model dynamics significantly. ► Sectoral shocks in the sticky price version create aggregate fluctuations.