Loughborough University
Browse
Ali Moghaddasi-AEJMacro.pdf (963.91 kB)

Do job destruction shocks matter in the theory of unemployment

Download (963.91 kB)
journal contribution
posted on 2019-07-03, 09:00 authored by Melvyn G. Coles, Ali Moghaddasi Kelishomi
Because the data show that market tightness is not orthogonal to unemployment, this paper identifies the many empirical difficulties caused by adopting the free entry of vacancies assumption in the Diamond-Mortensen-Pissarides (DMP) framework. Relaxing the free entry assumption and using Simulated Method of Moments (SMM) finds the vacancy creation process is less than infinitely elastic. Because a recession-leading job separation shock then causes vacancies to fall as unemployment increases, the ad hoc restriction to zero job separation shocks (to generate Beveridge curve dynamics) becomes redundant. In contrast to standard arguments, the calibrated model finds the job separation process drives unemployment volatility over the cycle.

Funding

UK Economic and Social Research Council (ESRC), award reference ES/I037628/1.

History

School

  • Business and Economics

Department

  • Business

Published in

American Economic Journal: Macroeconomics

Volume

10

Issue

3

Pages

118 - 136

Citation

COLES, M.G. and MOGHADDASI KELISHOMI, A., 2018. Do job destruction shocks matter in the theory of unemployment. American Economic Journal: Macroeconomics, 10 (3), pp.118-136.

Publisher

© American Economic Association

Version

  • AM (Accepted Manuscript)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

Publication date

2018-07-01

Notes

This paper was accepted for publication in the journal American Economic Journal: Macroeconomics and the definitive published version is available at https://doi.org/10.1257/mac.20150040.

ISSN

1945-7707

eISSN

1945-7715

Language

  • en

Usage metrics

    Loughborough Publications

    Exports

    RefWorks
    BibTeX
    Ref. manager
    Endnote
    DataCite
    NLM
    DC