Long Live the Vacancy

47 Pages Posted: 9 Sep 2020

See all articles by Christian Haefke

Christian Haefke

Institute for Advanced Studies (IHS); NYU, Abu Dhabi; IZA Institute of Labor Economics

Michael Reiter

Institute for Advanced Studies (IHS)

Abstract

We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. In the absence of free entry long lived vacancies and endogenous separations give rise to a vacancy depletion channel which we identify via joint unemployment and vacancy dynamics. We show conditions for constrained efficiency and discuss important implications of vacancy longevity for modeling and calibration, in particular regarding match cyclicality and wages. When calibrated to the postwar US economy, the model explains not only standard deviations and autocorrelations of labor market variables, but also their dynamic correlations with only one shock.

Keywords: Beveridge curve, business cycles, job destruction, random matching, separations, unemployment volatility, wage determination

JEL Classification: E24, E32, J63, J64

Suggested Citation

Haefke, Christian and Reiter, Michael, Long Live the Vacancy. IZA Discussion Paper No. 13666, Available at SSRN: https://ssrn.com/abstract=3687143 or http://dx.doi.org/10.2139/ssrn.3687143

Christian Haefke (Contact Author)

Institute for Advanced Studies (IHS) ( email )

Josefstädter Straße 39
1080 Vienna
Austria

NYU, Abu Dhabi ( email )

PO Box 129188
Abu Dhabi
United Arab Emirates

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Michael Reiter

Institute for Advanced Studies (IHS) ( email )

Josefstaedter Strasse 39
Vienna, A-1080
Austria

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