Arbeitspapier

Revisiting the Matching Function

This paper shows analytically and numerically that there are two ways of generating an observationally equivalent comovement between matches, unemployment, and vacancies in dynamic labor market models: either by assuming a standard Cobb-Douglas contact function or by combining a degenerate contact function with idiosyncratic productivity shocks for new jobs. Despite this observational equivalence, we provide several reasons for why it is important to understand what happens inside the black box of job creation. We calibrate a combined model with both mechanisms to administrative German wage and labor market flow data. In contrast to the model without idiosyncratic shocks, the combined model is able to replicate the observed negative time trend in estimated matching functions. In addition, the full nonlinear combined model generates highly asymmetric business cycle responses to large aggregate shocks.

Language
Englisch

Bibliographic citation
Series: IZA Discussion Papers ; No. 8515

Classification
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Business Fluctuations; Cycles
Labor Turnover; Vacancies; Layoffs
Unemployment: Models, Duration, Incidence, and Job Search
Subject
matching function
idiosyncratic productivity
job creation
vacancies
time trend
asymmetries

Event
Geistige Schöpfung
(who)
Kohlbrecher, Britta
Merkl, Christian
Nordmeier, Daniela
Event
Veröffentlichung
(who)
Institute for the Study of Labor (IZA)
(where)
Bonn
(when)
2014

Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

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Object type

  • Arbeitspapier

Associated

  • Kohlbrecher, Britta
  • Merkl, Christian
  • Nordmeier, Daniela
  • Institute for the Study of Labor (IZA)

Time of origin

  • 2014

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