Worker heterogeneity and endogenous separations in a matching model of unemployment fluctuations

Mark Bils, Yongsung Chang, Sun Bin Kim

Research output: Contribution to journalArticle

18 Citations (Scopus)

Abstract

We model worker heterogeneity in the rents from being employed in a Diamond-Mortensen-Pissarides model of matching and unemployment. We show that heterogeneity, reflecting differences in match quality and worker assets, reduces the extent of fluctuations in separations and unemployment. We find that the model faces a trade-off- it cannot produce both realistic dispersion in wage growth across workers and realistic cyclical fluctuations in unemployment.

Original languageEnglish
Pages (from-to)128-154
Number of pages27
JournalAmerican Economic Journal: Macroeconomics
Volume3
Issue number1
DOIs
Publication statusPublished - 2011 Jan

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance(all)

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