Productivity and job flows: heterogeneity of new hires and continuing jobs in the business cycle

Arbeitspapier

This paper focuses on productivity dynamics of a firm-worker match as a potential explanation for the 'unemployment volatility puzzle'. We let new matches and continuing jobs differ in terms of productivity level and sensitivity to aggregate productivity shocks. As a result, new matches have a higher destruction rate and lower, but more volatile, wages than old matches, as new hires receive technology associated with the latest vintage. In our model, an aggregate productivity shock generates a persistent productivity difference between the two types of matches, creating an incentive to open new productive vacancies and to destroy old matches that are temporarily less productive. The model produces a well behaved Beveridge curve, despite endogenous job destruction and more volatile vacancies and unemployment, without needing to rely on differing wage setting mechanisms for new and continuing jobs.

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• ISBN: 978-952-462-515-9
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 15/2009

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Business Fluctuations; Cycles ; Unemployment: Models, Duration, Incidence, and Job Search
• Subject: matching ; productivity shocks ; new hires ; continuing jobs ; job flows ; Beveridge curve ; vintage structure

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kilponen, Juha ; Vanhala, Juuso
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/212136