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Rational inattention in hiring decisions
We provide an information-based theory of matching efficiency fluctuations. Rationally inattentive firms have limited capacity to process information and cannot perfectly identify suitable applicants. During recessions, higher losses from hiring unsuitable workers cause firms to be more selective in hiring. When firms cannot obtain sufficient information about applicants, they err on the side of caution and accept fewer applicants to minimize losses from hiring unsuitable workers. Pro-cyclical acceptance rates drive a wedge between meeting and hiring rates, explaining fluctuations in matching ...
Working Paper
Phillips Meets Beveridge
The Phillips curve plays a central role in the macroeconomics literature. However, there is little consensus on the forcing variable that drives inflation in the model, i.e., on the appropriate measure of “slack” in the economy. In this work, we systematically assess the ability of variables commonly used in the literature to (i) predict and (ii) explain inflation fluctuations over time and across U.S. metropolitan areas. In particular, we exploit a newly constructed panel dataset with job openings and vacancy filling cost proxies covering 1982-2022. We find that the vacancy-unemployment ...