Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099607 | Journal of Economic Dynamics and Control | 2007 | 28 Pages |
Abstract
In the U.S. labor market, the vacancy-unemployment ratio and employment react sluggishly to productivity shocks. We show that the job matching model in its standard form cannot reproduce these patterns due to excessively rapid vacancy responses. Extending the model to incorporate sunk costs for vacancy creation yields highly realistic dynamics. Creation costs induce entrant firms to smooth the adjustment of new openings following a shock, leading the stock of vacancies to react sluggishly.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Shigeru Fujita, Garey Ramey,