Worker Heterogeneity and Endogenous Separations in a Matching Model of Unemployment Fluctuations

Mark Bils, Yongsung Chang and Sun-Bin Kim

American Economic Journal: Macroeconomics, 2011, vol. 3, issue 1, 128-54

Abstract: We model worker heterogeneity in the rents from being employed in a Diamond-Mortensen-Pissarides model of matching and unemployment. We show that heterogeneity, reflecting differences in match quality and worker assets, reduces the extent of fluctuations in separations and unemployment. We find that the model faces a trade-off—it cannot produce both realistic dispersion in wage growth across workers and realistic cyclical fluctuations in unemployment. (JEL D31, E24, E32, J41, J63)

JEL-codes: D31 E24 E32 J41 J63 (search for similar items in EconPapers)
Date: 2011
Note: DOI: 10.1257/mac.3.1.128
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Citations: View citations in EconPapers (66)

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