Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations

Bils, Mark; Chang, Yongsung; Kim, Sun Bin

doi:10.1257/mac.3.1.128

Cited by 56 publications

(56 citation statements)

References 26 publications

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“…Bils, Chang, and Kim (2011) extend the canonical search-and-matching model to allow for heterogeneity in the reservation wage (value of leisure) across workers and study the amplification of aggregate shocks. To calibrate the separation probability, they use the SIPP, but only count permanent separations that do not result in a recall within four months, and target an average unemployment rate of 6 percent.…”

Section: Related Literaturementioning

confidence: 99%

“…This strategy presumably (although they do not say) excludes the contribution to unemployment of those workers who are separated and then recalled within the four-month period. We investigate whether the recall option affects the incentives of the firm and the worker to search for new matches, that is, whether recall and search interact, as suggested by the microeconomic literature, in which case the calibration strategy by Bils, Chang, and Kim (2011) would be problematic. In addition, we show that their choice of a four-month unemployment duration cutoff to define a recall leads to a significant underestimate of true recalls, because of data issues in the SIPP that we will discuss in detail.…”

Section: Related Literaturementioning

confidence: 99%

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Recall and Unemployment

Fujita

Moscarini²

2017

American Economic Review

129

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Unemployment is commonly understood as a state of job search, and is measured accordingly. Due to information imperfections, workers cannot immediately find the kind of employment that they desire and that the market offers somewhere. One leading interpretation of these search frictions is the extreme heterogeneity of jobs: by pay, schedule, location, task, work environment; and workers: by various types of skills, work ethics, collegiality, and so on. Therefore, it takes time and effort from both sides to identify and arrange a suitable match. If, however, a worker who separates from an employer and goes through a jobless spell eventually returns to work there, then much of this heterogeneity may be irrelevant, since employer and employee already know each other. In this paper, we show that recalls in the US labor market are a pervasive phenomenon, with a distinct cyclical pattern and significant implications for individual worker experiences and aggregate unemployment volatility.

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Section: Related Literaturementioning

confidence: 99%

Section: Related Literaturementioning

confidence: 99%

Recall and Unemployment

Fujita

Moscarini²

2017

American Economic Review

129

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“…Recall plays an even smaller role in the macroeconomic literature on unemployment. Bils et al (2011) extend the canonical search-and-matching model to allow for heterogeneity in the reservation wage (value of leisure) across workers and study the amplification of aggregate shocks. When calibrating the separation rate, they use the SIPP, only count permanent separations that do not result in a recall within four months, and target an average unemployment rate of 6%.…”

Section: Related Literaturementioning

confidence: 99%

“…This strategy presumably (although they do not say) exclude the contributions to unemployment of those workers who are eventually recalled within four months. We investigate whether the recall option affects the incentives for existing and new firms to post new vacancies and to engage in costly search, that is, whether recall and search interact, in which case the calibration strategy in Bils et al (2011) is potentially problematic. In addition, we show that Bils et al's choice of a four month unemployment duration cutoff to define a recall leads to significantly underestimate true recalls, because of data issues in the SIPP that we discovered and discuss in detail.…”

Section: Related Literaturementioning

confidence: 99%

Recall and Unemployment

Fujita¹,

Moscarini²

2013

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Using data from the Survey of Income and Program Participation (SIPP) covering 1990-2011, we document that a surprisingly large number of workers return to their previous employer after a jobless spell and experience more favorable labor market outcomes than job switchers. Over 40% of all workers separating into unemployment regain employment at their previous employer; over a fifth of them are permanently separated workers who did not have any expectation of recall, unlike those on temporary layoff. Recalls are associated with much shorter unemployment duration and better wage changes. Negative duration dependence of unemployment nearly disappears once recalls are excluded. We also find that the probability of finding a new job is more procyclical and volatile than the probability of a recall. Incorporating this fact into an empirical matching function significantly alters its estimated elasticity and the time-series behavior of matching efficiency, especially during the Great Recession. We develop a canonical search-and-matching model with a recall option where new matches are mediated by a matching function, while recalls are free and triggered both by aggregate and job-specific shocks. The recall option is lost when the unemployed worker accepts a new job. A quantitative version of the model captures well our cross-sectional and cyclical facts through selection of recalled matches.

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“…When we denote the value of a job for an employed worker, we use the notation E (E) to indicate that a worker is employed in a low (high) productivity job. Likewise, J (J) denotes the value of a low (high) 15 Even though endogenous separations in the presence of stochastic match surplus is an important determinant of labor market dynamics (see amongst others Mortensen and Pissarides (1994) and Bils, Chang, and Kim (2011)), we aim to make the point in this paper under exogenous separations.…”

Section: Environmentmentioning

confidence: 99%

Unemployment cycles

Lindenlaub¹,

Eeckhout²

2015

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The labor market by itself can create cyclical outcomes, even in the absence of exogenous shocks.We propose a theory that shows that the search behavior of the employed has profound aggregate implications for the unemployed. There is a strategic complementarity between active on-the-job search and vacancy posting by firms: active search changes the number of searchers and the duration of a job, and in the presence of sorting, it improves the quality of the pool of searchers. More vacancy posting in turn makes costly on-the-job search more attractive, a self-fulfilling belief. The absence of on-the-job search discourages vacancy posting, rendering costly on-the-job search unattractive.This model of multiple equilibria can account for large fluctuations in vacancies, unemployment, and job-to-job transitions; it provides a rationale for the Jobless Recovery through a novel channel of the employed searchers crowding out the unemployed; and it gives rise to a shift in the Beveridge Curve (the unemployment-vacancy locus). Each of these phenomena is matched in the data.

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Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations

Cited by 56 publications

References 26 publications

Recall and Unemployment

Recall and Unemployment

Recall and Unemployment

Unemployment cycles

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