Marginal Jobs, Heterogeneous Firms, & Unemployment Flows
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NBER Working Paper No. 13777
Issued in February 2008
NBER Program(s): EFG LS ME
This paper introduces a notion of fir m size into a search and matching model with endogenous job destruction. The outcome is a rich, yet analytically tractable framework that can be used to analyze a broad set of features of both the cross section and the dynamics of the aggregate labor market. In a set of quantitative applications we show that the model can provide a coherent account of a) the salient features of the distributions of employer size, and employment growth across establishments; b) the amplitude and propagation of cyclical fluctuations in flows between employment and unemployment; c) the negative comovement of unemployment and vacancies in the form of the Beveridge curve; and d) the dynamics of the distribution of employer size over the business cycle.
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This paper was revised on December 5, 2011 Acknowledgments
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