DP16733 Equilibrium Job Turnover and the Business Cycle

Author(s): Carlos Carrillo-Tudela, Alex Clymo, Melvyn G Coles
Publication Date: November 2021
Keyword(s): Business cycle, Firm Dynamics, job search
JEL(s): E24, E32, J62, J63
Programme Areas: Labour Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16733

This paper develops and estimates a fully microfounded equilibrium business cycle model of the US labor market with aggregate productivity shocks. Those microfoundations are consistent with evidence regarding the underlying distribution of firm growth rates across firms [by age and size] and, when aggregated, are consistent with macro-evidence regarding gross job creation and job destruction flows over the cycle. By additionally incorporating on-the-job search, we systematically characterise the stochastic relationships between aggregate job creation and job destruction flows across firms, gross hire and quit flows [churning] by workers across firms, as well as the persistence and volatility of unemployment and worker job finding rates over the cycle.