2016-09 | November 2017
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The Weak Job Recovery in a Macro Model of Search and Recruiting Intensity
An estimated model with labor search frictions and endogenous variations in search intensity and recruiting intensity does well in explaining the deep recession and weak recovery of the U.S. labor market during and after the Great Recession. The model features a sunk cost of vacancy creation, under which firms rely on adjusting both the number of vacancies and recruiting intensity to respond to aggregate shocks. This stands in contrast to the textbook model with free entry, which implies constant recruiting intensity. Our estimation suggests that fluctuations in search and recruiting intensity driven by productivity and discount factor shocks help substantially bridge the gap between the actual and model-predicted job filling and finding rates.
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Leduc, Sylvain, and Zheng Liu. 2016. "The Weak Job Recovery in a Macro Model of Search and Recruiting Intensity," Federal Reserve Bank of San Francisco Working Paper 2016-09. Available at https://doi.org/10.24148/wp2016-09