Working Paper

Job Heterogeneity and Aggregate Labor Market Fluctuations

Abstract: This paper disciplines a model with search over match quality using microeconomic evidence on worker mobility patterns and wage dynamics. In addition to capturing these individual data, the model provides an explanation for aggregate labor market patterns. Poor match quality among first jobs implies large fluctuations in unemployment due to a responsive job destruction margin. Endogenous job destruction generates a burst of layoffs at the onset of a recession and, together with on-the-job search, generates a negative comovement between unemployment and vacancies. A significant job ladder, consistent with the empirical wage dispersion, provides ample scope for the propagation of vacancies and unemployment.

Keywords: Unemployment; amplification; match-quality; job destruction;

JEL Classification: E24; E32; J63; J64;

https://doi.org/10.26509/frbc-wp-201904

Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2019-02-01

Number: 19-04