Ali Moghaddasi-AEJMacro.pdf (963.91 kB)
Do job destruction shocks matter in the theory of unemployment
journal contribution
posted on 2019-07-03, 09:00 authored by Melvyn G. Coles, Ali Moghaddasi KelishomiBecause 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: MacroeconomicsVolume
10Issue
3Pages
118 - 136Citation
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 AssociationVersion
- 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
2018-07-01Notes
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
1945-7707eISSN
1945-7715Publisher version
Language
- en