Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212136
Authors: 
Kilponen, Juha
Vanhala, Juuso
Year of Publication: 
2009
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 15/2009
Abstract: 
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.
Subjects: 
matching
productivity shocks
new hires
continuing jobs
job flows
Beveridge curve
vintage structure
JEL: 
E24
E32
J64
Persistent Identifier of the first edition: 
ISBN: 
978-952-462-515-9
Document Type: 
Working Paper

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