I thank Fabio Canova, Michael Evers, Jordi Galí, Christian Häfke, Per Krusell, Ricardo Lagos, Monika Merz, Markus Poschke, Garey Ramey, Thijs van Rens, and Harald Uhlig as well as numerous conference and seminar participants for helpful comments and suggestions.
New evidence, old puzzles: Technology shocks and labor market dynamics
Article first published online: 8 NOV 2012
Copyright © 2012 Almut Balleer
Volume 3, Issue 3, pages 363–392, November 2012
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How to Cite
Balleer, A. (2012), New evidence, old puzzles: Technology shocks and labor market dynamics. Quantitative Economics, 3: 363–392. doi: 10.3982/QE35
- Issue published online: 8 NOV 2012
- Article first published online: 8 NOV 2012
- Submitted October, 2009. Final version accepted May, 2012.
- Labor market dynamics;
- technology shocks;
- structural VAR;
- search and matching;
- business cycle
Can the standard search-and-matching labor market model replicate the business cycle fluctuations of the job finding rate and the unemployment rate? In the model, these fluctuations are driven by movements in productivity. This paper investigates the sources of productivity fluctuations that are commonly interpreted as technology shocks. I estimate different types of technology shocks from structural vector autoregressions and reassess the empirical performance of the standard model based on second moments that are conditional on technology and nontechnology (preference) shocks. Most prominently, the model is able to replicate the conditional volatilities of job finding and unemployment. However, it fails to replicate the correlation of productivity with unemployment and job finding that is conditional on both technology and nontechnology shocks.