ESTABLISHMENT DYNAMICS,VACANCIES, AND UNEMPLOYMENT: A NEOCLASSICAL APPROACH |
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| Authors: | Marcelo Veracierto |
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| Institution: | Federal Reserve Bank of Chicago, U.S.A.This article originated in a conversation with Randall Wright and was heavily influenced by it. I have also benefited from the comments of Bjoern Bruegemann, Marco Cozzi, Michael Elsby, Toshihiko Mukoyama, Nicolas Petrosky‐Nadeau, three anonymous referees, and the editor, Guido Menzio. All remaining errors are solely mine. The views expressed here do not necessarily reflect the position of the Federal Reserve Bank of Chicago or the Federal Reserve System. |
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| Abstract: | This article introduces and analyzes a Walrasian model of worker flows, job flows, vacancies, and unemployment. Calibrating the model to U.S. data, the article finds that all variables comove with output quite well but that they fluctuate too little. However, the failure is not as bad as in “Shimer's puzzle.” Interestingly, the article also finds that introducing establishment dynamics into the model, while realistic, is irrelevant for understanding unemployment and vacancy fluctuations: The business cycles of the model with establishment dynamics are virtually the same as those of a version with a representative firm. |
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