TY - JOUR AU - Cooper,Russell AU - Haltiwanger,John AU - Willis,Jonathan L. TI - Implications of Search Frictions: Matching Aggregate and Establishment-level Observations JF - National Bureau of Economic Research Working Paper Series VL - No. 13115 PY - 2007 Y2 - May 2007 UR - http://www.nber.org/papers/w13115 L1 - http://www.nber.org/papers/w13115.pdf N1 - Author contact info: Russell Cooper Department of Economics European University Institute via della Piazzola, 43 Firenze, 50133 ITALY E-Mail: russellcoop@gmail.com John C. Haltiwanger Department of Economics University of Maryland College Park, MD 20742 Tel: 301/405-3504 Fax: 301/405-3542 E-Mail: haltiwan@econ.umd.edu Jonathan Willis Federal Reserve Bank of Kansas City 1 Memorial Drive Kansas City, MO 64198 Tel: 8168812852 Fax: 8168812199 E-Mail: jonathan.willis@kc.frb.org AB - This paper studies hours, employment, vacancies and unemployment at micro and macro levels. It is built around a set of facts concerning the variability of unemployment and vacancies in the aggregate and, at the establishment level, the distribution of net employment growth and the comovement of hours and employment growth. A search model with frictions in hiring and firing is used as a framework to understand these observations. Notable features of this search model include non-convex costs of posting vacancies, establishment level profitability shocks and a contracting framework that determines the response of hours and wages to shocks. The search friction creates an endogenous, cyclical adjustment cost. We specify and estimate the parameters of the search model using simulated method of moments to match establishment-level and aggregate observations. The estimated search model is able to capture both the aggregate and establishment-level facts. ER -