DOCSLIB.ORG

The Cyclical Behavior of Equilibrium Unemployment and Vacancies

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
The Cyclical Behavior of Equilibrium Unemployment and Vacancies The Cyclical Behavior of Equilibrium Unemployment and Vacancies By ROBERT SHIMER* This paper argues that the textbook search and matching model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies in response to shocks of a plausible magnitude. In the United States, the standard deviation of the vacancy-unemployment ratio is almost 20 times as large as the standard deviation of average labor productivity, while the search model predicts that the two variables should have nearly the same volatility. A shock that changes average labor productivity primarily alters the present value of wages, generating only a small movement along a downward-sloping Beveridge curve (unemployment- vacancy locus). A shock to the separation rate generates a counterfactually positive correlation between unemployment and vacancies. In both cases, the model exhibits virtually no propagation. (JEL E24, E32, J41, J63, J64) In recent years, the Mortensen-Pissarides cyclical behavior of two of its central elements, search and matching model has become the unemployment and vacancies, which are both standard theory of equilibrium unemployment highly variable and strongly negatively corre- (Dale Mortensen and Chris Pissarides, 1994; lated in U.S. data. Equivalently, the model can- Pissarides, 2000). The model is attractive for a not explain the strong procyclicality of the rate number of reasons: it offers an appealing de- at which an unemployed worker finds a job. scription of how the labor market functions; it is I focus on two sources of shocks: changes in analytically tractable; it has rich and generally labor productivity and changes in the separation intuitive comparative statics; and it can easily rate of employed workers from their job. In a be adapted to study a number of labor market one-sector model, a change in labor productiv- policy issues, such as unemployment insurance, ity is most easily interpreted as a technology or firing restrictions, and mandatory advanced no- supply shock. But in a multi-sector model, a tification of layoffs. Given these successes, one preference or demand shock changes the rela- might expect that there would be strong evi- tive price of goods, which induces a change in dence that the model is consistent with key real labor productivity as well. Thus these business cycle facts. On the contrary, I argue in shocks represent a broad set of possible this paper that the model cannot explain the impulses. An increase in labor productivity relative to the value of nonmarket activity and to the cost * Department of Economics, University of Chicago, of advertising a job vacancy makes unemploy- 1126 East 59th Street, Chicago IL 60637 (e-mail: ment relatively expensive and vacancies rela- [email protected]). A previous version of this paper tively cheap.1 The market substitutes toward was entitled “Equilibrium Unemployment Fluctuations.” I thank Daron Acemoglu, Robert Barro, Olivier Blanchard, vacancies, and the increased job-finding rate V. V. Chari, Joao Gomes, Robert Hall, Dale Mortensen, pulls down the unemployment rate, moving the Christopher Pissarides, two anonymous referees, the editor economy along a downward sloping Beveridge Richard Rogerson, and numerous seminar participants for curve (vacancy-unemployment or v-u locus). comments that are incorporated throughout the paper. This But the increase in hiring also shortens unem- material is based upon work supported by the National Science Foundation under grants SES-0079345 and SES- ployment duration, raising workers’ threat point 0351352. I am grateful to the Alfred P. Sloan Foundation in wage bargaining, and therefore raising the for financial support, to the Federal Reserve Bank of Min- neapolis for its hospitality while I worked on an early version of this paper, and to Mihai Manea, and especially 1 The interpretation in this paragraph and its sequel Sebastian Ludmer, for excellent research assistance. builds on discussions with Robert Hall. 25 26 THE AMERICAN ECONOMIC REVIEW MARCH 2005 expected present value of wages in new jobs. choice of whether to open a new vacancy. The Higher wages absorb most of the productivity equilibrium vacancy rate depends on the unem- increase, eliminating the incentive for vacancy ployment rate, on labor market tightness, and on creation. As a result, fluctuations in labor pro- the expected present value of wages in new ductivity have little impact on the unemploy- employment relationships. Wages, in turn, are ment, vacancy, and job-finding rates. determined by Nash bargaining, at least in new An increase in the separation rate does not matches. In principle, the wage in old matches affect the relative value of unemployment and may be rebargained in the face of aggregate vacancies, and so leaves the v-u ratio essentially shocks or may be fixed by a long-term employ- unchanged. Since the increase in separations ment contract. Section II A describes the basic reduces employment duration, the unemploy- model, while Section II B derives a forward- ment rate increases, and so therefore must va- looking equation for the v-u ratio in terms of cancies. As a result, fluctuations in the model parameters. separation rate induce a counterfactually posi- Section II C performs simple analytical com- tive correlation between unemployment and parative statics in some special cases. For ex- vacancies. ample, I show that the elasticity of the v-u ratio Section I presents the relevant U.S. business with respect to the difference between labor cycle facts: unemployment u is strongly coun- productivity and the value of nonmarket activity tercyclical, vacancies v are equally strongly pro- or “leisure” is barely in excess of 1 for reason- cyclical, and the correlation between the two able parameter values. To reconcile this with variables is Ϫ0.89 at business cycle frequen- the data, one must assume that the value of cies. As a result, the v-u ratio is procyclical and leisure is nearly equal to labor productivity, so volatile, with a standard deviation around its market work provides little incremental utility. trend equal to 0.38 log points. To provide fur- The separation rate has an even smaller impact ther evidence in support of this finding, I exam- on the v-u ratio, with an elasticity of Ϫ0.1 ine the rate at which unemployed workers find according to the comparative statics. Moreover, jobs. If the process of pairing workers with jobs while shocks to labor productivity at least in- is well-described by an increasing, constant duce a negative correlation between unemploy- returns-to-scale matching function m(u,v), as in ment and vacancies, separation shocks cause Pissarides (1985), the job finding rate is f ϭ both variables to increase, which tends to gen- m(u,v)/u, an increasing function of the v-u ratio. erate a positive correlation between the two I use unemployment-duration data to measure variables. Similar results obtain in some other the job-finding rate directly. The standard devi- special cases. ation of fluctuations in the job-finding rate Section II D calibrates the stochastic model to around trend is 0.12 log points and the correla- match U.S. data along as many dimensions as tion with the v-u ratio is 0.95. Finally I look at possible, and Section II E presents the results. the two proposed impulses. The separation rate The exercise confirms the quantitative predic- is less correlated with the cycle and moderately tions of the comparative statics. If the economy volatile, with a standard deviation about trend is hit only by productivity shocks, it moves equal to 0.08 log points. Average labor produc- along a downward-sloping Beveridge curve, but tivity is weakly procyclical and even more sta- empirically plausible movements in labor pro- ble, with a standard deviation about trend of ductivity result in tiny fluctuations in the v-u 0.02 log points. ratio. Moreover, labor productivity is perfectly In Section II, I extend the Pissarides’s (1985) correlated with the v-u ratio, indicating that the search and matching model to allow for aggre- model has almost no internal propagation mech- gate fluctuations. I introduce two types of anism. If the economy is hit only by separation shocks: labor productivity shocks raise output shocks, the v-u ratio is stable in the face of in all matches but do not affect the rate at which large unemployment fluctuations, so vacancies employed workers lose their job; and separation are countercyclical. Equivalently, the model- shocks raise the rate at which employed workers generated Beveridge curve is upward-sloping. become unemployed but do not affect the pro- Section II F explores the extent to which the ductivity in surviving matches. In equilibrium, Nash bargaining solution is responsible for there is only one real economic decision: firms’ these results. First I examine the behavior of VOL. 95 NO. 1 SHIMER: UNEMPLOYMENT AND VACANCIES 27 wages in the face of labor productivity and productivity shocks. This distinguishes the separation shocks. An increase in labor produc- present model from those based upon intertem- tivity encourages firms to create vacancies. The poral labor supply decisions (Robert E. Lucas, resulting increase in the job-finding rate puts Jr., and Leonard Rapping, 1969). Thus this pa- upward pressure on wages, soaking up virtually per explores the extent to which a combination all of the shock. A decrease in the separation of search frictions and aggregate shocks can rate also induces firms to create more vacancies, generate plausible fluctuations in unemploy- again putting upward pressure on wages and ment and vacancies if labor supply is inelastic. minimizing the impact on the v-u ratio and It suggests that search frictions per se scarcely job-finding rate. On the other hand, I examine a amplify shocks. The paper does not examine version of the model in which only workers’ whether a search model with an elastic labor bargaining power is stochastic.
Load more

Recommended publications
  • Curriculum Vitae Robert Shimer Contact Information
    CURRICULUM VITAE ROBERT SHIMER CONTACT INFORMATION Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 (773) 702-9015 (office) (773) 834-3452 (fax) email: [email protected] web: http://sites.google.com/site/robertshimer/ EDUCATION 1992–1996 : Massachusetts Institute of Technology, Ph.D. in economics 1990–1992 : Oxford University, Nuffield College, M.Phil. in economics 1986–1990 : Yale University, B.A., major in economics PROFESSIONAL EXPERIENCE MAIN ACADEMIC POSITION 2008–present : Alvin H. Baum Professor in Economics and the College, University of Chicago 2003–2008 : Professor in Economics and the College, University of Chicago 2001–2003 : Associate Professor of Economics, Princeton University 1996–2001 : Assistant Professor of Economics, Princeton University OTHER POSITIONS 2002–present : Research Associate, National Bureau of Economic Research (Faculty Research Fellow since 1999) 2010–present : Research Fellow, IZA (Institute for the Study of Labor) 2012–present : Panel of Economic Advisors, Congressional Budget Office 2005–present : Consultant, Federal Reserve Bank of Chicago 2011–present : Visiting Scholar, Center for Human Capital Studies, Federal Reserve Bank of Atlanta 2011–present : Consultant, Federal Reserve Bank of Minneapolis 2008 : Visiting Professor of Economics, Massachusetts Institute of Technology (Fall Semester) 2002–2007 : Visitor, Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis (various years) 2002–2006 : Research Associate, Federal Reserve Bank of Cleveland 2001 : Visiting Assistant Professor of Economics, University of Chicago (Spring Quarter) April 15, 2014 1 ROBERT SHIMER RESEARCH AND STUDY GRANTS 2013–2015 : National Science Foundation Research Grant with Veronica Guerrieri ($295,846) 2010–2014 : National Science Foundation Research Grant with Fernando Alvarez ($406,458) 2007–2011 : National Science Foundation Research Grant with Ivan Werning ($376,150) 2004–2007 : National Science Foundation Research Grant ($193,177) 2002–2005 : Alfred P.
    [Show full text]
  • Advancing the Theory and Methods for Understanding Employment Effects of Environmental Regulation: Workshop Agenda
    Advancing the Theory and Methods for Understanding Employment Effects of Environmental Regulation: Workshop Agenda Chair: Kerry Smith (Arizona State University) 8:00- Coffee and pastry 8:20 8:20- Kerry Smith (Arizona State University) – Introduction 8:35 8:35- Al McGartland (Environmental Protection Agency (EPA) – EPA Context 8:45 8:45- Anna Belova (Abt Associates), Wayne Gray (Clark University), Joshua Linn (Resources 9:15 for the Future), & Richard Morgenstern (Resources for the Future)–BGLM: "Environmental Regulations and Industry Employment: A Reassessment" 9:15- Discussant: Reed Walker (University of California, Berkeley) 9:30 9:30- Discussant addressing BGLM paper and related policy issues: Michael Greenstone 9:50 (Massachusetts Institute of Technology/Brookings Institution) 9:50- Open discussion 10:15 10:15- Break 10:30 10:30- Timothy J. Bartik (W.E. Upjohn Institute for Employment Research): "The Social Cost of 11:00 Potential Job Losses Due to Environmental Regulations: How Job Losses' Social Costs Compare to Lost Earnings and Overall Social Costs of Regulations" 11:00- Discussant:Arik Levinson (Georgetown University) (15 minute talk followed by open 11:30 discussion) 11:30- Nicolai Kuminoff (Arizona State University), Todd Schoellman (Arizona State University), 12:00 & Christopher Timmins (Duke University)–KST: "Can Sorting Models Help Us Evaluate the Employment Effects of Environmental Regulations?" 12:00- Discussant: Daniel J. Phaneuf (University of Wisconsin) (15 minute talk followed by open 12:30 discussion) 12:30- Lunch 1:30 1:30- Discussant addressing Bartik and KST papers: R. Scott Farrow (UMBC) (20 minute 2:00 talk followed by open discussion) 2:00- Richard Rogerson (Princeton University): "Assessing the Economic Effects of 2:30 Environmental Regulations: A General Equilibrium Approach" 2:30- Discussant: Timothy J.
    [Show full text]
  • Reassessing the Ins and Outs of Unemployment∗
    Reassessing the Ins and Outs of Unemployment∗ Robert Shimer University of Chicago [email protected] First Version: January 16, 2005 Current Version: June 21, 2005 Abstract This paper uses readily accessible data to measure the probability that an employed worker becomes unemployed and the probability that an unemployed worker finds a job, the ins and outs of unemployment. The job finding probability is strongly procyclical and the separation probability is nearly acyclical, particularly during the last two decades. Using the underlying microeconomic data, the paper shows that these results are not due to compositional changes in the pool of searching workers, nor are they due to movements of workers in and out of the labor force. These results contradict the conventional wisdom that has guided the development of macroeconomic models of the labor market during the last fifteen years. ∗My title borrows from Darby, Haltiwanger, and Plant (1986). I am grateful for comments from Fernando Alvarez, Gadi Barlevy, Francesco Belviso, Tito Boeri, Robert Hall, David Laibson, and Randall Wright and from seminar participants at the Bank of Italy, Bocconi University, the Chicago Fed, Harvard University, the St. Louis Fed, and the University of Texas-Austin on an earlier version of this paper. This paper is supported by grants from the National Science Foundation and the Sloan Foundation. 1 Introduction This paper measures the probability that an employed worker becomes unem- ployed and the probability that an unemployed worker finds a job. Using United States data from 1948 to 2004, I find that there are substantial fluctuations in unemployed workers’ job finding probability at business cycle frequencies, while employed workers’ separation probability is comparative acyclic.
    [Show full text]
  • CONTACT INFORMATION Department of Economics
    CURRICULUM VITAE ROBERT SHIMER CONTACT INFORMATION Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 (773) 702-9015 (office) (773) 702-8490 (fax) [email protected] http://home.uchicago.edu/~shimer PERSONAL Date of Birth: August 21, 1968 Nationality: U.S.A. EDUCATION INSTITUTION DEGREE YEAR Yale University B.A. 1990 Oxford University, Nuffield College M.Phil. 1992 M.I.T. Ph.D. 1996 PROFESSIONAL EXPERIENCE MAIN ACADEMIC POSITION 1996 – 2001 : Assistant Professor of Economics, Princeton University. 2001 – 2003 : Associate Professor of Economics, Princeton University. 2003 – Present : Professor of Economics, University of Chicago. OTHER POSITIONS 2001 : Visiting Assistant Professor of Economics, University of Chicago 2002 – 2006 : Research Associate, Federal Reserve Bank of Cleveland. 2002 – Present : Visitor, Institute for Empirical Macroeconomics, Federal Reserve Bank of Minneapolis (various years) 2005 – Present : Consultant, Federal Reserve Bank of Chicago. Revised: April 25, 2007 ROBERT SHIMER RESEARCH AND STUDY GRANTS 1990–1992 : Nuffield College Studentship; Overseas Research Student Grant. 1990–1993 : National Science Foundation Graduate Fellowship. 1992–1994 : MIT Fellowship. 1995–1996 : Alfred P. Sloan Doctoral Dissertation Fellowship. 1997–2000 : National Science Foundation Research Grant ($111,154) 2000–2004 : National Science Foundation Research Grant ($154,959) 2002–2005 : Alfred P. Sloan Research Fellow. 2004–2007 : National Science Foundation Research Grant ($193,177) 2007–2010 : National Science Foundation Research Grant with Ivan Werning ($376,150). AWARDS, PRIZES, AND HONORS 1990 : McGowan Prize, Yale University, for best Senior Essay in Industrial Organization. 1992 : George Webb Medley Prize for best M.Phil. thesis and George Webb Medley Prize for best written examination, Oxford University.
    [Show full text]
  • Reassessing the Ins and Outs of Unemployment
    NBER WORKING PAPER SERIES REASSESSING THE INS AND OUTS OF UNEMPLOYMENT Robert Shimer Working Paper 13421 http://www.nber.org/papers/w13421 NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA 02138 September 2007 My title borrows from Darby, Haltiwanger, and Plant (1986). I am grateful for comments from Fernando Alvarez, Gadi Barlevy, Francesco Belviso, Tito Boeri, Steven Davis, Jason Faberman, Robert Hall, David Laibson, Gary Solon, and Randall Wright and from seminar participants at the Bank of Italy, Bocconi University, the Chicago Fed, Harvard University, the St.\ Louis Fed, and the University of Texas-Austin on an earlier version of this paper. This paper is supported by grants from the National Science Foundation and the Sloan Foundation. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research. © 2007 by Robert Shimer. All rights reserved. Short sections of text, not to exceed two paragraphs, may be quoted without explicit permission provided that full credit, including © notice, is given to the source. Reassessing the Ins and Outs of Unemployment Robert Shimer NBER Working Paper No. 13421 September 2007 JEL No. J6,E24,E32 ABSTRACT This paper uses readily accessible data to measure the probability that an employed worker becomes unemployed and the probability that an unemployed worker finds a job, the ins and outs of unemployment. Since 1948, the job finding probability has accounted for three-quarters of the fluctuations in the unemployment rate in the United States and the employment exit probability for one-quarter.
    [Show full text]
  • Reassessing the Ins and Outs of Unemployment∗
    Reassessing the Ins and Outs of Unemployment∗ Robert Shimer University of Chicago [email protected] First Version: January 16, 2005 Current Version: June 21, 2005 Abstract This paper uses readily accessible data to measure the probability that an employed worker becomes unemployed and the probability that an unemployed worker finds a job, the ins and outs of unemployment. The job finding probability is strongly procyclical and the separation probability is nearly acyclical, particularly during the last two decades. Using the underlying microeconomic data, the paper shows that these results are not due to compositional changes in the pool of searching workers, nor are they due to movements of workers in and out of the labor force. These results contradict the conventional wisdom that has guided the development of macroeconomic models of the labor market during the last fifteen years. ∗My title borrows from Darby, Haltiwanger, and Plant (1986). I am grateful for comments from Fernando Alvarez, Gadi Barlevy, Francesco Belviso, Tito Boeri, Robert Hall, David Laibson, and Randall Wright and from seminar participants at the Bank of Italy, Bocconi University, the Chicago Fed, Harvard University, the St. Louis Fed, and the University of Texas-Austin on an earlier version of this paper. This paper is supported by grants from the National Science Foundation and the Sloan Foundation. 1 Introduction This paper measures the probability that an employed worker becomes unem- ployed and the probability that an unemployed worker finds a job. Using United States data from 1948 to 2004, I find that there are substantial fluctuations in unemployed workers’ job finding probability at business cycle frequencies, while employed workers’ separation probability is comparative acyclic.
    [Show full text]
  • Why Is the U.S. Unemployment Rate So Much Lower?
    This PDF is a selection from an out-of-print volume from the National Bureau of Economic Research Volume Title: NBER Macroeconomics Annual 1998, volume 13 Volume Author/Editor: Ben S. Bernanke and Julio Rotemberg, editors Volume Publisher: MIT Press Volume ISBN: 0-262-52271-3 Volume URL: http://www.nber.org/books/bern99-1 Publication Date: January 1999 Chapter Title: Why is the U.S. Unemployment Rate So Much Lower? Chapter Author: Robert Shimer Chapter URL: http://www.nber.org/chapters/c11245 Chapter pages in book: (p. 11 - 74) Robert Shimer PRINCETON UNIVERSITY Why Is the U. S. Unemployment Rate So Much Lower? In a well-known paper in one of the inaugural issues of the Brookings Papers, Robert Hall posed the question, "Why is the Unemployment Rate So High at Full Employment?" (Hall, 1970). Hall, writing in the context of the 3.5% unemploy- ment rate that prevailed in 1969, answered his question by explaining that the full-employment rate was so high because of the normal turnover that is inevita- ble in a dynamic economy. Today [in 1986], four years into an economic recovery, the unemployment rate hovers around 7%. Over the past decade, it has averaged 7.6% and never fallen below 5.8%. While some of the difference between recent and past levels of unemployment has resulted from cyclical devel- opments, it is clear that a substantial increase in the normal or natural rate of unemployment has taken place. (Summers, 1986) 1. Introduction In November 1997, the U.S. unemployment rate fell to 4.6%, the lowest level since 1973.
    [Show full text]
  • 2021 Asian Meeting of the Econometric Society
    2021 ASIAN MEETING OF THE ECONOMETRIC SOCIETY CURTIN UNIVERSITY MALAYSIA 25-27 June 2021 Make tomorrow better. Program Overview (All in Malaysia Time: UTC+8) June 24, 2021 (Thursday) 08:00 – 09:30 Sargan Lecture I [Azeem Shaikh, University of Chicago] 21:00 – 22:30 Sargan Lecture II [Azeem Shaikh, University of Chicago] June 25, 2021 (Friday) 08:00 – 08:30 Opening Ceremony 08:30 – 09:15 Presidential Address [Penny Goldberg, Yale University] 09:15 – 09:30 Coffee/Tea Break 09:30 – 10:15 Keynote Lecture I [Cheng Hsiao, University of Southern California] 10:15 – 10:30 Coffee/Tea Break 10:30 – 12:00 Contributed Sessions (AM04, AM05, AM15, AM22, AM25, AM28, AM34, AM42, AM45) 12:00 – 13:00 Lunch Break 13:00 – 14:30 Contributed Sessions (AS01, AS02, AS14, AS26, AS32, AS36, AZ01) 14:30 – 14:45 Coffee/Tea Break 14:45 – 16:15 Contributed Sessions (AS03, AS04, AS15, AS24, AS37, AS38, AZ02, EU22) 16:15 – 16:30 Coffee/Tea Break 16:30 – 18:00 Contributed Sessions (EU01, EU05, EU07, EU08, EU13, EU19, EU23, EU26) 18:00 – 19:00 Dinner Break 19:00 – 20:30 Contributed Sessions (AS18, AS20, AZ03, EU04, EU09, EU18, EU21) 20:30 – 20:45 Coffee/Tea Break 20:45 – 22:15 Contributed Sessions (AM06, AM07, AM18, AM19, AM23, AM30, AM31, AM38, AM44) 22:15 – 23:00 Coffee/Tea Break 01 Program Overview (All in Malaysia Time: UTC+8) June 26 (Saturday) 08:30 – 09:15 Keynote Lecture II [Dilip Mookherjee, Boston University] 09:15 – 09:30 Coffee/Tea Break 09:30 – 10:15 Keynote Lecture III [Vincent Crawford, University of Oxford & University of California San Diego] 10:15 – 10:30 Coffee/Tea
    [Show full text]
  • 1 Olivier Jean Blanchard March 15, 2014 Born: December 27
    CURRICULUM VITAE Olivier Jean Blanchard March 15, 2014 Born: December 27, 1948, Amiens, France Married: Noelle Golinelli, 1973; 3 children Citizenship: France (Permanent resident of the U.S.) Education: DES Economics 1972. Ph.D. Economics, MIT, 1977. Current position: Robert M. Solow Professor of Economics emeritus, Massachusetts Institute of Technology, 2011-, Economic Counselor, and Director, Research Department, International Monetary Fund, 2008- Past positions: Instructor, Massachusetts Institute of Technology, 1977. Assistant Professor, Harvard University, 1977-1981. Associate Professor, Harvard University, 1981-1983. Associate Professor, Massachusetts Institute of Technology, 1983-1985. Professor, Massachusetts Institute of Technology, 1985-1993 Visiting Taussig Professor, Harvard University, 1997-1998 Chairman, Department of Economics, Massachusetts Institute of Technology, 1998-2003 Visiting scholar, Russell Sage Foundation, spring 2004. Class of 1941 Professor, Massachusetts Institute of Technology, 1994-2011 Other Current Positions, Grants, Fellowships: Fellow, Econometric Society, since 1985 Member, American Academy of Arts and Sciences, since 1990 Research Associate, National Bureau of Economic Research, 1982-. Member, Brookings Panel on Economic Activity, 1986- Davidson Institute Research Fellow, 1997- National Science Foundation grants, since 1979 Academic Advisory Panel, Peterson Institute, 2010- Member, Academy of Sciences of Lisbon, 2010- Current Journals / Scientific Boards: 1 Founding editor, American Economic Journal
    [Show full text]
  • The Cyclical Behavior of Equilibrium Unemployment and Vacancies: Evidence and Theory∗
    The Cyclical Behavior of Equilibrium Unemployment and Vacancies: Evidence and Theory∗ Robert Shimer Department of Economics University of Chicago [email protected] March 31, 2004 Abstract This paper argues that the textbook search and matching model cannot generate the observed business-cycle-frequency fluctuations in unemployment and job vacancies in response to shocks of a plausible magnitude. In the U.S., the standard deviation of the vacancy-unemployment ratio is 18 times as large as the standard deviation of average labor productivity, while the search model predicts that the two variables should have nearly the same volatility. A shock that changes average labor productivity primarily alters the present value of wages, generating only a small movement along a downward sloping Beveridge curve (unemployment-vacancy locus). A shock to the separation rate generates a counterfactually positive correlation between unemployment and vacancies. In both cases, the shock is only slightly amplified and the model exhibits virtually no propagation. ∗A previous version of this paper was entitled ‘Equilibrium Unemployment Fluctuations’. I thank Daron Acemoglu, Robert Barro, Olivier Blanchard, V. V. Chari, Joao Gomes, Robert Hall, Dale Mortensen, Christo- pher Pissarides, two anonymous referees, the editor Richard Rogerson, and numerous seminar participants for comments that are incorporated throughout the current draft. This material is based upon work sup- ported by the National Science Foundation under grants SES-0079345 and SES-0351352. I am grateful to the Alfred P. Sloan Foundation for financial support, to the Federal Reserve Bank of Minneapolis for its hospitality while I revised a previous version of this paper, and to Mihai Manea and especially Sebastian Ludmer for excellent research assistance.
    [Show full text]
  • Comment On" the Timing of Labor Market Expansions: New Facts and a New Hypothesis"
    This PDF is a selection from a published volume from the National Bureau of Economic Research Volume Title: NBER Macroeconomics Annual 2008, Volume 23 Volume Author/Editor: Daron Acemoglu, Kenneth Rogoff and Michael Woodford, editors Volume Publisher: University of Chicago Press Volume ISBN: 0-226-00204-7 Volume URL: http://www.nber.org/books/acem08-1 Conference Date: April 4-5, 2008 Publication Date: April 2009 Chapter Title: Comment on "The Timing of Labor Market Expansions: New Facts and a New Hypothesis" Chapter Author: Robert Shimer Chapter URL: http://www.nber.org/chapters/c7272 Chapter pages in book: (p. 59 - 71) Comment Robert Shimer, University of Chicago and NBER This is an ambitious paper. It documents a novel set of facts about the na- ture of labor market expansions during the last 15–20 years in the United States, and it develops a significant extension to the Burdett and Mortensen (1998) model to explain them. I am not going to quibble with the facts. Moscarini and Postel‐Vinay are correctly cautious in noting that most of their data cover only two recessions, in 1991 and 2001. Both events were mild by historical standards, and the comovement of labor market vari- ables, for example, unemployment and hours, and other economic out- comes, notably labor productivity, was unusual by historical standards. Unfortunately, there is little to do about this except wait until the economy generates more data and possibly look for data from other countries. I instead focus this discussion on the authors’ theoretical explanation for these facts. I start by explaining the mechanics of their model, the forces driving the firm size distribution and the amount of job‐to‐job transitions.
    [Show full text]
  • Curriculum Vitae Robert Shimer Contact Information
    CURRICULUM VITAE ROBERT SHIMER CONTACT INFORMATION Kenneth C. Griffin Department of Economics University of Chicago 1126 East 59th Street Chicago, IL 60637 (773) 702-9015 (office) email: [email protected] web: http://sites.google.com/site/robertshimer/ PROFESSIONAL EXPERIENCE MAIN ACADEMIC POSITION 2008{present : Alvin H. Baum Professor in Economics and the College, University of Chicago 2003{2008 : Professor in Economics and the College, University of Chicago 2001{2003 : Associate Professor of Economics, Princeton University 1996{2001 : Assistant Professor of Economics, Princeton University OTHER POSITIONS 2002{present : Research Associate, National Bureau of Economic Research (Faculty Research Fellow 1999{2002) 2005{present : Consultant, Federal Reserve Bank of Chicago; Academic Advisory Council in various years 2010{present : Research Fellow, IZA (Institute for the Study of Labor) 2011{present : Visiting Scholar, Center for Human Capital Studies, Federal Reserve Bank of Atlanta 2012{present : Panel of Economic Advisors, Congressional Budget Office 2015{2016 : Economy-Wide Modeling Panel Member, Environmental Protection Agency 2014{2015 : Visiting Professor, Stockholm University Institute for International Economic Studies 2002{2015 : Consultant, Federal Reserve Bank of Minneapolis Visitor, Institute for Empirical Macroeconomics (various years) 2015 : Consultant, Federal Reserve Bank of New York 2014 : Visiting Professor of Economics, New York University (Spring Semester) 2013 : Visiting Lecturer of Economics, London School of Economics (Fall Term) 2008 : Visiting Professor of Economics, Massachusetts Institute of Technology (Fall Semester) 2002{2006 : Research Associate, Federal Reserve Bank of Cleveland 2001 : Visiting Assistant Professor of Economics, University of Chicago (Spring Quarter) April 20, 2018 1 ROBERT SHIMER EDUCATION 1992{1996 : Massachusetts Institute of Technology, Ph.D. in economics 1990{1992 : Oxford University, Nuffield College, M.Phil.
    [Show full text]