Search, Shirking and Labor Market Volatility

Christopher Martin, Bingsong Wang

Research output: Working paper

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Abstract

This paper proposes a modified version of the standard search and
matching model of the labour market that combines a shirking mechanism
with the assumption that firms post wages. We argue that a small shirking
effect will generate a low rate of profit and lead to a low rate of vacancy
creation, implying that the vacancy filling rate is high. Through this
mechanism we show that our model delivers a close match of the simulated
volatilities, correlations and autocorrelations of unemployment, vacancies,
labour market tightness and the job finding rate with values observed in
US data. In doing so, it outperforms prominent alternative models.
Original languageEnglish
Place of PublicationBath, U. K.
PublisherDepartment of Economics, University of Bath
Number of pages18
Publication statusPublished - 24 Oct 2016

Publication series

NameBath Economics Research Working Papers
PublisherUniversity of Bath
Volume56/16

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  • Cite this

    Martin, C., & Wang, B. (2016). Search, Shirking and Labor Market Volatility. (Bath Economics Research Working Papers; Vol. 56/16). Department of Economics, University of Bath.