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Heterogeneity, Job Creation and Unemployment Volatility
Author(s) -
Guerrieri Veronica
Publication year - 2007
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/j.1467-9442.2007.00516.x
Subject(s) - economics , volatility (finance) , unemployment , business cycle , margin (machine learning) , job creation , benchmark (surveying) , order (exchange) , information asymmetry , productivity , labour economics , econometrics , microeconomics , macroeconomics , computer science , geodesy , finance , machine learning , geography
In this paper, I explore the impact of match‐specific heterogeneity at the job creation margin on business cycle fluctuations. I show that this form of heterogeneity alone does not help to amplify labor market volatility, either under full or under asymmetric information. First, I show analytically that, under full information, heterogeneity has no first‐order effect on the response of unemployment and job creation to productivity, and actually tends to dampen the response of market tightness. Then, in a series of calibrations, I show that with both full and asymmetric information, the model delivers labor market volatilities close to the representative‐agent, full‐information benchmark.