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Federal Reserve Bank of Kansas City
Research Working Paper
Hours and employment implications of search frictions: matching aggregate and establishment-level observations
Russell W. Cooper
John Haltiwanger
Jonathan L. Willis
Abstract

This paper studies worker and job flows at the establishment and aggregate levels. The paper is built around a set of facts concerning the variability of unemployment and vacancies in the aggregate, the distribution of net employment growth and the comovement of hours and employment growth at the establishment level. A search model with frictions in hiring and firing is used as a framework to understand these observations. Notable features of this search model include non-convex costs of posting vacancies, establishment level profitability shocks and a contracting framework that determines the response of hours and wages to shocks. We specify and estimate the parameters of the search model using simulated method of moments to match establishment-level and aggregate observations.


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Russell W. Cooper & John Haltiwanger & Jonathan L. Willis, Hours and employment implications of search frictions: matching aggregate and establishment-level observations, Federal Reserve Bank of Kansas City, Research Working Paper RWP 06-14, 2006.
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Keywords: Employment ; Unemployment ; Hours of labor
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