Labor Market Search Model Research Articles

Labor Market Search, Sticky Prices, and Interest Rate Policies

In this paper, a simple search model of the labor market is combined with sticky prices to investigate the dynamic response of the economy to nominal interest rate shocks. The framework allows the respective roles of labor market search, nominal price rigidities, and policy inertia in accounting for the impact of monetary policy shocks to be studied. Labor market rigidities introduced by the process of matching job seekers with job vacancies amplify the real impact and reduce the inflation impact of a monetary policy shock. As a result, significantly less price rigidity is required; for example, the dynamic response of output and inflation in the new Keynesian model with a Walrasian labor market and only 15% of firms optimally adjusting prices each period can be replicated in the labor market search model when a more realistic 50% of firms optimally adjust their price each period.

Allocation du temps et propriétés cycliques du modèle d'appariement sur le marché du travail

Cet article étudie les propriétés cycliques du modèle d’appariement avec une destruction exogène des emplois. Son mécanisme de propagation interne des chocs a été critiqué en raison des trop fortes contraintes sur le marché du travail qu’il requiert. Pour évaluer la portée de cette critique, les prédictions de ce modèle sont comparées selon plusieurs hypothèses régissant la définition du taux d’emploi ainsi que les allocations du temps au travail et à la recherche d’emploi. Les résultats indiquent qu’il suffit de prendre en compte la variabilité de ces allocations pour que le modèle puisse reproduire conjointement les faits stylisés du marché du travail et la persistance du produit.

Information and Communication Technology as Technical Change in Matching and Production

In this paper, we integrate two workhorse models in economics: The monopolistic competition model of Dixit and Stiglitz and the search unemployment model of Pissarides. Information and communication technology (ICT) is interpreted as a (i) technical progress in the matching function of the Pissarides labor market search model, where it is increasing the probability of filling a vacancy, and (ii) technical change in the production function of the Dixit-Stiglitz goods market model where it is increasing fixed costs and decreasing variable costs. All effects together, modeled as a permanent once-and-for-all ICT and internet shock, increase the vacancy/unemployment ratio, decrease the long-run equilibrium unemployment rate, and increase wages.

Can the labor market search model explain the fluctuations of allocations of time?

We examine whether the labor market search model can account for the business cycle facts on the three uses of time: employment, unemployment and non-participation. The standard search model is modified by making endogenous the time allocation decision between market and non-market activities. Despite its good performance on the employment rate, this framework fails to mimic the empirical dynamics on the two other uses of time, notably the strongly countercyclical behavior of the unemployment rate. This conclusion is shown to be robust to the specification of households’ preferences.

Labor–market search and real business cycles: Nash bargaining vs. fair wage

This paper modifies the standard labor market search model with Nash bargaining for a wage determination scheme which relies on efficiency wage theories. More precisely, the equilibrium wage rests on the gift-exchange motivation. It is shown that the combination of search frictions and fair wage hypothesis allows a business cycle model to replicate the Dunlop–Tarshis observation without requiring a second source of impulses.

The Phillips and Beveridge curves revisited

This paper extends the labor market search model to account for monopolist intermediate good firms who face price adjustment costs. We show quantitatively that embedding monetary shocks in this framework allows to mimic the Phillips and Beveridge curves.

Solving and Estimating Dynamic Models under Rational Expectations

This paper combines recent developments in methods for solving and estimating rational expectations dynamic models. These developments are applied to a model of labor-market search, where firms operate under uncertainty. We assess the ability of the structural model to mimic nonlinear features found in the data. The solution to the model is obtained using a method of weighted residuals. The model is then estimated using an auxiliary model technique. Our results indicate that the simple theoretical representation of the labor market we propose is able to match the overall behavior of US hours worked along various dimensions. Beyond they show the usefulness of this combined approach to study dynamic models under rational expectations.

Unemployment insurance and labor-market activity in Canada

In 1972, the Canadian Federal government implemented a wide-ranging set of reforms to the nation's unemployment insurance system. The economic impact of these reforms are evaluated in the context of a dynamic general equilibrium model of labor-market search. A calibrated version of the model estimates that the 1972 reforms had only a modest impact on unemployment, but led to a significant increase in the rate of labor-market turnover, particularly on flows into and out of the labor force. The model also estimates that on net, the reforms likely contributed to an increase in social welfare by reducing the level of idiosyncratic income risk.

Separating the effects of aggregate and sectoral shocks with estimates from a Markov-switching search model

Abstract A two-sector stochastic model of labor market search is estimated in order to identify aggregate and sectoral shocks which impact upon the recruitment-intensity decisions of firms. Separation of aggregate and sectoral recruitment effects is achieved through the use of data for two Canadian regions which were affected in opposite directions by recent resource price shocks. The results of the estimation process suggest that sectoral shocks can have significant quantitative effects on unemployment duration and the unemployment rate.

Female first marriage in East and Southeast Asia: A Kiefer-Neumann model

Many studies have shown that schooling levels of husband and wife are important determinants of household behavior in developing countries. In this article we ask how the schooling levels of husband and wife come to be associated with each other through the marriage market. The Kiefer-Neumann model of labor market search is adapted to marital search, the aim being to explain both the positive sorting on education levels for spouses, and the positive relationship between female schooling and age at first marriage. World Fertility Survey data for Indonesia, Korea, and Malaysia are employed in the analyses.