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Search frictions and evolving labour market dynamics
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Ellington, Michael, Martin, Chris and Wang, Bingsong (2021) Search frictions and evolving labour market dynamics. Journal of Economic Dynamics and Control, 127 . 104104. doi:10.1016/j.jedc.2021.104104 ISSN 0165-1889.
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Official URL: http://dx.doi.org/10.1016/j.jedc.2021.104104
Abstract
This paper puts Search Frictions models under novel empirical scrutiny. To capture changing dynamics, we fit a Bayesian time-varying parameter VAR to US labour market data from 1965–2016. Using a DSGE model with Search Frictions, we identify several structural shocks, including a shock to worker bargaining power that we name a wage shock. We argue that the wage shock is a key driver of cyclical variation, explaining a higher proportion the variation of these variables than productivity, demand or job separation shocks. We also document stark differences between empirical and theoretical impulse response functions that cast doubt on the core transmission mechanism of search and matching models.
| Item Type: | Journal Article | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Subjects: | H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance |
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| Divisions: | Faculty of Social Sciences > Economics | ||||||||
| Library of Congress Subject Headings (LCSH): | Labor market, Labor market -- United States, Efficiency wage theory , Efficient market theory -- Statistical methods, Wages | ||||||||
| Journal or Publication Title: | Journal of Economic Dynamics and Control | ||||||||
| Publisher: | Elsevier BV | ||||||||
| ISSN: | 0165-1889 | ||||||||
| Official Date: | June 2021 | ||||||||
| Dates: |
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| Volume: | 127 | ||||||||
| Article Number: | 104104 | ||||||||
| DOI: | 10.1016/j.jedc.2021.104104 | ||||||||
| Status: | Peer Reviewed | ||||||||
| Publication Status: | Published | ||||||||
| Access rights to Published version: | Restricted or Subscription Access | ||||||||
| Date of first compliant deposit: | 29 April 2021 | ||||||||
| Is Part Of: | 1 |
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