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THE CYCLICAL BEHAVIOR OF UNEMPLOYMENT AND VACANCIES WITH LOSS OF SKILLS DURING UNEMPLOYMENT

Published online by Cambridge University Press:  22 April 2016

Victor Ortego-Marti
Victor Ortego-Marti*
Affiliation:
University of California, Riverside
*
Address correspondence to: Victor Ortego-Marti, Department of Economics, University of California, Riverside, Sproul Hall 3132, Riverside, CA 92521, USA; e-mail: victor.ortego-marti@ucr.edu.
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Abstract

This paper studies the cyclical fluctuations in unemployment and vacancies in a search and matching model in which workers lose skills during periods of unemployment. Firms' profits fluctuate more because aggregate productivity affects the economy's average human capital. Moreover, wages for workers with lower levels of human capital are closer to the value of nonmarket time, leading to more rigid wages. Fluctuations in the vacancy--unemployment ratio are larger than those in the baseline search and matching model and similar to those we observe in the data.

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Articles
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Macroeconomic Dynamics , Volume 21 , Issue 6 , September 2017 , pp. 1277 - 1304
Copyright
Copyright © Cambridge University Press 2016 

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Footnotes

I am grateful to the Associate Editor, two anonymous referees, Marcelle Chauvet, Yu-Chin Chen, Russell Cooper, Joel David, Jang-Ting Guo, Urmee Khan, Pete Klenow, David Lagakos, David Malueg, Vincenzo Quadrini, Xavier Raurich, Guillaume Rocheteau, Richard Suen, Stephen Turnovsky, Gianluca Violante, Carl Walsh, Joel Watson, Randall Wright, and Alwyn Young for invaluable comments and suggestions. I also benefited from helpful discussions with seminar participants at UC Riverside and the 15th Annual Meeting of the Association for Public Economic Theory at the University of Washington.

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