On-the-job search and cyclical unemployment: Crowding out vs. vacancy effects |
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| Affiliation: | 1. Clark University, Economics Department, 950 Main St., Worcester, MA 01610, USA;2. Banque centrale du Luxembourg, Research Department, 2 Bd. Royal, L-2983, Luxembourg;1. Division of Cancer Sciences, School of Medical Sciences, Faculty of Biology, Medicine and Health, University of Manchester, Manchester, UK;2. Centre for Biostatistics, School of Health Sciences, University of Manchester, Manchester, UK;3. Colorectal and Peritoneal Oncology Centre, The Christie NHS Foundation Trust, Manchester M20 4BX, UK;1. LEEPS Lab, University of California, Santa Cruz, United States;2. Department of Economics, University of California, Santa Cruz, United States;1. Laboratoire de Physique des Matériaux, Faculté des Sciences de Sfax, Université de Sfax, B. P. 1171, Route de Soukra, Km 3, 3000 Sfax, Tunisia;2. Centre de Recherches en Numérique de Sfax, Cité El Ons, Route de Tunis, Km 9, Sfax. B. P. 275, Sakiet Ezzit, 3021 Sfax, Tunisia;1. Service of Emergency, University Hospital Virgen de las Nieves, Granada, Spain;2. Anesthesiology Service, University Hospital Virgen de las Nieves, Granada, Spain;3. Department of Research Methods and Diagnostics in Education, Facultad de Ciencias de la Educación, Universidad de Granada, Granada, Spain |
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| Abstract: | Incorporating on-the-job search (OTJS) into a real business cycle model has been shown to increase the cyclical volatility of unemployment. Using a particularly simple model of OTJS, we show that the increased search of employed workers during expansions induces firms to open more vacancies, but also crowds out unemployed workers in the job search, resulting in an ambiguous overall effect on unemployment volatility. We show analytically and numerically that the difference between the employer׳s share of the match surplus with an employed versus an unemployed job seeker determines the degree to which OTJS increases unemployment volatility. We use this result to re-consider some related papers of OTJS and explain the amplification of volatility they obtain. Finally, we show that a plausible calibration of the OTJS model allows us to reproduce most significant features of the US labor data. |
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| Keywords: | On-the-job search Cyclical properties |
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