TY  - JOUR
AU  - Mortensen,Dale T.
AU  - Nagypal,Eva
TI  - More on Unemployment and Vacancy Fluctuations
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11692
PY  - 2005
Y2  - October 2005
UR  - http://www.nber.org/papers/w11692
L1  - http://www.nber.org/papers/w11692.pdf
N1  - Author contact info:
Dale T. Mortensen
Department of Economics
Northwestern University
2003 Sheridan Road
Evanston, IL 60208-2600
Tel: 847/491-8230
Fax: 847/491-7001
E-Mail: d-mortensen@northwestern.edu

Eva Nagypal
Chicago Partners
E-Mail: Eva.Nagypal@chicagopartners.com
AB  - Shimer (2005a) argues that the Mortensen-Pissarides equilibrium search model of unemployment explains only about 10% of the response in the job-finding rate to an aggregate productivity shock. Some of the recent papers inspired by his critique are reviewed and commented on here. Specifically, we suggest that the sole problem is neither the procyclicality of the wage nor the failure to account fully for the opportunity cost of employment. Although an amended version of the model, one that accounts for capital costs and counter cyclic involuntary separations, does much better, it still explains only 40% of the observed volatility of the job-finding rate. Finally, allowing for on-the-job search does not improve the amended models implications for the amplification of productivity shocks.
ER  -