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Specific Capital and Vintage Effects on the Dynamics of Unemployment and Vacancies

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Abstract:

In a reasonably calibrated Mortensen and Pissarides matching model, shocks to average labor productivity can account for a small portion of the fluctuations in unemployment and vacancies (Shimer (2005)). I add heterogeneity in jobs (matches) with respect to the time the job is created in the form of different embodied technology levels. I also introduce specific capital that, once adapted for a match, has less value in another match. I show that the augmented model can account for fluctuations in unemployment and vacancies, and that specific capital is important to decreasing the volatility of the destruction rate of existing matches.

Document Type: Short Communication

DOI: http://dx.doi.org/10.1257/aer.100.3.1214

Publication date: June 1, 2010

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