BIROn - Birkbeck Institutional Research Online

    State dependence in labor market fluctuations

    Pizzinelli, C. and Theodoridis, K. and Zanetti, F. (2020) State dependence in labor market fluctuations. Working Paper. Birkbeck, University of London, London, UK.

    [img]
    Preview
    Text
    31149.pdf - Published Version of Record

    Download (1MB) | Preview

    Abstract

    This paper documents state dependence in labor market uctuations. Using a Threshold Vector Autoregression model (TVAR), we establish that the unemployment rate, the job separation rate, and the job finding rate exhibit a larger response to productivity shocks during periods with low aggregate productivity. A Diamond-Mortensen-Pissarides model with endogenous job separation and on-the-job search replicates these empirical regularities well. We calibrate the model to match the standard deviation of the job-transition rates explained by productivity shocks in the TVAR, and show that the model explains 88 percent of the state dependence in the unemployment rate, 76 percent for the separation rate and 36 percent for the job finding rate. The key channel underpinning state dependence in both job separation and job finding rates is the interaction of the firm's reservation productivity level and the distribution of match-specific idiosyncratic productivity. Results are robust across several variations to the baseline model.

    Metadata

    Item Type: Monograph (Working Paper)
    Keyword(s) / Subject(s): Search and Matching Models, State Dependence in Business Cycles, Threshold Vector Autoregression
    School: Birkbeck Schools and Departments > School of Business, Economics & Informatics > Economics, Mathematics and Statistics
    Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Administrator
    Date Deposited: 04 Mar 2020 14:08
    Last Modified: 21 Jul 2020 01:08
    URI: http://eprints.bbk.ac.uk/id/eprint/31149

    Statistics

    Downloads
    Activity Overview
    0Downloads
    0Hits

    Additional statistics are available via IRStats2.

    Archive Staff Only (login required)

    Edit/View Item Edit/View Item