Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72026
Authors: 
Krause, Michael U.
Lubik, Thomas A.
Year of Publication: 
2004
Series/Report no.: 
Working Papers, The Johns Hopkins University, Department of Economics 513
Abstract: 
We develop a dynamic general equilibrium model where workers can engage in search while on the job. We show that on-the-job search is a key component in explaining labor market dynamics in models of equilibrium unemployment. The model predicts fluctuations of unemployment, vacancies, and labor productivity whose relative magnitudes replicate the data. A standard search and matching model suggests much lower volatitilities of these variables. Intuitively, in a boom, rising search activity on the job avoids excessive tightening of the labor market for expanding firms. This keeps wage pressures low, thus further increasing firms?incentives to post new jobs. Labor market tightness as measured by the vacancy-unemployment ratio is as volatile as in the data. The interaction between on-the-job search and job creation also generates a strong internal propagation mechanism.
Subjects: 
Search and matching
job-to-job mobility
worker flows Beveridge curve
business cycle
propagation
JEL: 
E24
E32
J64
Document Type: 
Working Paper

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