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❲❤❛t s❤✐❢ts t❤❡ ❇❡✈❡r✐❞❣❡ ❈✉r✈❡❄ ❘❡❝r✉✐t♠❡♥t ❊✛♦rt ❛♥❞ ❋✐♥❛♥❝✐❛❧ ❙❤♦❝❦s

❆❧❡ss❛♥❞r♦ ●❛✈❛③③❛✱ ❙✐♠♦♥ ▼♦♥❣❡②✱ ●✐❛♥❧✉❝❛ ❱✐♦❧❛♥t❡

◆❡✇ ❨♦r❦ ❯♥✐✈❡rs✐t②

▼❛② ✶✸✱ ✷✵✶✸

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❙❤✐❢t ✐♥ t❤❡ ❇❡✈❡r✐❞❣❡ ❈✉r✈❡

0.04 0.05 0.06 0.07 0.08 0.09 0.1 0.016 0.018 0.02 0.022 0.024 0.026 0.028 0.03 0.032

Unemployment rate Vacancy rate U.S. Beveridge Curve

2003:1−2007:12 2008:1−2013:10

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

▼❡❝❤❛♥✐s♠

• ◆♦r♠❛❧ t✐♠❡s

✶✳ ❋✐r♠s ❤❡t❡r♦❣❡♥❡♦✉s ✐♥ ♣r♦❞✉❝t✐✈✐t②✱ s✐③❡ ❛♥❞ ❞❡❜t✳ ✷✳ ❋✐r♠s ❜♦rr♦✇ t♦ s❛t✐s❢② ❛ ♥♦♥✲♥❡❣❛t✐✈✐t② ❝♦♥str❛✐♥t ♦♥ ❞✐✈✐❞❡♥❞s✳ ✸✳ ❋✐r♠s ❝❛♥ ❞❡❢❛✉❧t ❛♥❞ ❡①✐t✳ ❋❛❝❡ ❧♦❛♥ ♣r❡♠✐✉♠s✳ ✹✳ ❍✐r✐♥❣ ✜r♠s ♣❛rt✐❝✐♣❛t❡ ✐♥ ❢r✐❝t✐♦♥❛❧ ❧❛❜♦r ♠❛r❦❡ts ✐♥ ✇❤✐❝❤ t❤❡② ♣♦st ✈❛❝❛♥❝✐❡s ✈✐t ✇✐t❤ r❡❝r✉✐t♠❡♥t ❡✛♦rt ❡✐t ✺✳ ❋❛st❡r ❣r♦✇✐♥❣ ✜r♠s ✜❧❧ ✈❛❝❛♥❝✐❡s ❢❛st❡r

• ❉❛✈✐s✱ ❋❛❜❡r♠❛♥ ❛♥❞ ❍❛❧t✐✇❛♥❣❡r ✭✷✵✶✸✮

✻✳ ❏♦❜ ❝r❡❛t✐♦♥ ❞♦♠✐♥❛t❡❞ ❜② ②♦✉♥❣ ✜r♠s

• ❍❛❧t✐✇❛♥❣❡r✱ ❏❛r♠✐♥ ❛♥❞ ▼✐r❛♥❞❛ ✭✷✵✶✷✮

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

▼❡❝❤❛♥✐s♠

• ❋✐♥❛♥❝✐❛❧ ❝r✐s✐s ↔ ■♥❝r❡❛s❡❞ ♣r❡♠✐✉♠ ♦♥ ❧♦❛♥s

✶✳ ❨♦✉♥❣ ✜r♠s ❝♦♥str❛✐♥❡❞ = ⇒ ▲❡ss ❣r♦✇t❤ ✷✳ ▲♦✇❡r ✈❛❧✉❡ ♦❢ ✜r♠s = ⇒ ↓❊♥tr② ✴ ↑❊①✐t ✸✳ ▲♦✇❡r r❡❝r✉✐t♠❡♥t ❡✛♦rt = ⇒ P❡rs✐st❡♥t ❢❛❧❧ ✐♥ t❤❡ ❡✣❝✐❡♥❝② ♦❢ t❤❡ ♠❡❛s✉r❡❞ ❛❣❣r❡❣❛t❡ ♠❛t❝❤✐♥❣ ❢✉♥❝t✐♦♥✳ ❖✉t✇❛r❞ s❤✐❢t ✐♥ t❤❡ ❇❡✈❡r✐❞❣❡ ❝✉r✈❡✳ ✹✳ ❖❧❞❡r ✜r♠s ❧❡ss ❛✛❡❝t❡❞ = ⇒ ↓❍✐r✐♥❣ r❛t❤❡r t❤❛♥ ↑❙❡♣❛r❛t✐♦♥s✳

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❚♦❞❛②

✶✳ Pr❡s❡♥t ♠♦❞❡❧ ✷✳ ❉✐s❝✉ss ❝❛❧✐❜r❛t✐♦♥ ✸✳ ❋❡❛t✉r❡s ♦❢ t❤❡ ♠♦❞❡❧

• ❋✐r♠ ❞②♥❛♠✐❝s
• ❈♦♠♣❛r✐s♦♥ ♦❢ st❡❛❞② st❛t❡s
• ❘❡❝❡ss✐♦♥s ❞✉❡ t♦ ❝❤❛♥❣❡s ✐♥ ♣r♦❞✉❝t✐✈✐t②

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❋✐r♠s ✲ ❉❡❢❛✉❧t

❱❛❧✉❡ ▲❡t Π(♥, ❜, ③) ❜❡ t❤❡ ♣r❡s❡♥t ❞✐s❝♦✉♥t❡❞ ✈❛❧✉❡ ♦❢ ❞✐✈✐❞❡♥❞s ❛❢t❡r r❡❛❧✐s❛t✐♦♥ ♦❢ ♣r♦❞✉❝t✐✈✐t② ❛♥❞ ❡①✐t s❤♦❝❦✱ ❜❡❢♦r❡ t❤❡ ❡①✐t ✴ ❞❡❢❛✉❧t ❞❡❝✐s✐♦♥✳

• Pr♦❜❧❡♠ ♦❢ ❛♥ ✐♥❝✉♠❜❡♥t
• ❈❤♦✐❝❡✿ ❙t❛② ❛♥❞ r❡♣❛②✱ ♦r ❊①✐t ❛♥❞ ❞❡❢❛✉❧t

Π(♥, ❜, ③) = ♠❛① {Πs(♥, ❜, ③), ✵}

• ❈♦♥❞✐t✐♦♥❛❧ ♦♥ st❛②✐♥❣
• ❈❤♦✐❝❡✿ ❍✐r❡ ♦r ❋✐r❡

Πs(♥, ❜, ③) = ♠❛①

• Π❢ (♥, ❜, ③), Π❤(♥, ❜, ③)

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❋✐r♠s ✲ ❋✐r✐♥❣

• ❈❤♦✐❝❡✿ ❋✐r♠ s✐③❡ ♥′ ❛♥❞ ❧❡✈❡❧ ♦❢ ❞❡❜t ❜′

Π❢ (♥, ❜, ③) = ♠❛①

♥′,❜′ ❉❢ + β

• ③′∈Z

P(③, ③′)(✶ − δ)Π(♥′, ❜′, ③′) ❉❢ = ③♥′α − ✇(♥′, ❜′, ③)♥′ − χ + +◗(♥′, ❜′, ③)❜′ − ❜ ♥′ ∈ [♥, ♥] ❉❢ ≥ ✵

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❋✐r♠s ✲ ❍✐r✐♥❣

• ❈❤♦✐❝❡ ❋✐r♠ s✐③❡ ♥′✱ ❧❡✈❡❧ ♦❢ ❞❡❜t ❜′✱ r❡❝r✉✐t♠❡♥t ❡✛♦rt ❡✱

✈❛❝❛♥❝✐❡s ✈′ Π❤(♥, ❜, ③) = ♠❛①

♥′,❜′,❡,✈ ❉❤ + β

• ③′∈Z

P(③, ③′)(✶ − δ)Π(♥′, ❜′, ③′) ❉❤ = ③♥′α − ✇(♥′, ❜′, ③)♥′ − χ − ❈(❡, ✈, ♥) +◗(♥′, ❜′, ③)❜′ − ❜ ♥′ − ♥ = q❡✈ ♥′ > ♥ ❡ ∈ [✵, ✶] ❉❤ ≥ ✵

• ❚✇♦✲st❛❣❡ ♣r♦❜❧❡♠✿

✶✳ ❙t❛❣❡ ■ ❈❤♦♦s❡ t❛r❣❡t ❡♠♣❧♦②♠❡♥t ❧❡✈❡❧ ♥′ ✷✳ ❙t❛❣❡ ■■ ❈❤♦♦s❡ ♣♦s✐t✐♦♥s t♦ ♦♣❡♥ ✈✱ ❛♥❞ r❡❝r✉✐t♠❡♥t ❡✛♦rt ❡

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❘❡❝r✉✐t♠❡♥t ♣r♦❜❧❡♠

❈(♥, ♥′) = ♠✐♥

❡,✈ ❈(❡, ✈, ♥) =

• κ

γ✷ + ✶ ✈ ♥ γ✷ + ❝ γ✶ ❡γ✶

• ✈

s.t. ♥′ − ♥ ≥ q❡✈

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

■❞❡♥t✐✜❝❛t✐♦♥

• ❙♦❧✉t✐♦♥✿ q = µθ−φ

❧♦❣ ✈ ♥

• =

Ω ❝ κ

• +

φγ✶ γ✶ + γ✷ ❧♦❣ θ + γ✶ γ✶ + γ✷ ❧♦❣ ♥′ − ♥ ♥

• ❧♦❣

❤ ✈

• =

✲Ω ❝

κ

• −

φγ✶ γ✶ + γ✷ ❧♦❣ θ + γ✷ γ✶ + γ✷ ❧♦❣ ♥′ − ♥ ♥

• ❈(♥, ♥′)

= Γ(κ) ✶ + γ✷ ✈ ♥ γ✷ ✈ ✶✳ γ✷/γ✶ ❉❛✈✐s✱ ❋❛❜❡r♠❛♥ ❛♥❞ ❍❛❧t✐✇❛♥❣❡r ✭✷✵✶✸✮ ε❢ ,❣ =

γ✷ γ✶+γ✷ = ✵.✽✷

✷✳ γ✷ ❈♦♥tr♦❧s t❤❡ ✐♥❝r❡❛s✐♥❣ r❡t✉r♥s t♦ s❝❛❧❡ ✐♥ ✈❛❝❛♥❝✐❡s✳ ✸✳ κ ❚♦t❛❧ ❝♦st ♦❢ ❤✐r✐♥❣ ✹✳ ❝/κ ▼❡❛♥ ✈❛❝❛♥❝② r❛t❡

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

P♦t❡♥t✐❛❧ ❡♥tr❛♥ts

• ❙t❛t❡ ❉r❛✇ ③ ∼ ❊①♣(ξ)
• ❈❤♦✐❝❡✿ ❊♥t❡r ♦r ❙t❛② ♦✉t

Π✵(③) = ♠❛① {Πs(♥, ✵, ③) − χ✵, ✵}

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❇❛♥❦s

• ❈♦♠♣❡t✐t✐✈❡ ❜❛♥❦s
• ■♥t❡r♠❡❞✐❛t❡ ❢✉♥❞s ❛t ❝♦st ϕ
• ❉❡♣♦s✐ts ❡❛r♥ r✐s❦✲❢r❡❡ r❛t❡ ❘ = ¯

◗−✶

• Pr✐❝❡ ♣❡r ✉♥✐t ❧♦❛♥s✿ ◗(♥′, ❜′, ③)
• ❉❡❢❛✉❧t✿ ✭✐✮ ❋✐①❡❞ ❝♦st ♦❢ ❞❡❢❛✉❧t ζ✱ ✭✐✐✮ ♥♦ r❡♣❛②♠❡♥t
• ❊①♣❡❝t❡❞ r❡t✉r♥ ♦♥ ❧♦❛♥ ✐s ❡q✉❛❧ t♦ r✐s❦❧❡ss r❡t✉r♥ ♣❛✐❞ ♦♥

❞❡♣♦s✐ts ◗(♥′, ❜′, ③) = ¯ ◗(✶−ϕ)

• Pr [❘❡♣❛②|♥′, ❜′, ③] − ζ

❜′ Pr [❉❡❢❛✉❧t|♥′, ❜′, ③]

• Pr❡♠✐✉♠ ¯

◗/◗(♥′, ❜′, ③) ✐♥❝r❡❛s❡s ✇✐t❤ ↑ ϕ , ↑ ζ , ↑ Pr [❉❡❢❛✉❧t|♥′, ❜′, ③] , ↓ ❜′

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❈❛❧✐❜r❛t✐♦♥

P❛r❛♠❡t❡r ❱❛❧✉❡ ❆✳ ❍♦✉s❡❤♦❧❞ ❉✐s❝♦✉♥t r❛t❡ β ✵✳✾✾✻✼ ❙✐③❡ ♦❢ ❧❛❜♦r ❢♦r❝❡ ¯ ▲ ✶✼✳✺✷ ❇✳ ❋✐r♠s ❈♦st ❢✉♥❝t✐♦♥ γ✷ ✻✳✻✹ ■♥✐t✐❛❧ ❧❛❜♦r ♥ ✶ ▼❡❛s✉r❡ ♣♦t❡♥t✐❛❧ ❡♥tr❛♥ts ▼✵ ✷✳✸ ❈✳ ▲❛❜♦r ♠❛r❦❡t ▼❛t❝❤✐♥❣ ❢✉♥❝t✐♦♥ φ ✵✳✻✵ ❇❛r❣❛✐♥✐♥❣ ♣♦✇❡r η ✵✳✻✵ ❉✳ Pr♦❞✉❝t✐✈✐t②

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❈❛❧✐❜r❛t✐♦♥

P❛r❛♠❡t❡r ❱❛❧✉❡ ❚❛r❣❡t ▼ ❉ ❆✳ ❍♦✉s❡❤♦❧❞ ❯t✐❧✐t② ♦❢ ❧❡✐s✉r❡ ❜ ✵✳✹ ▼♦♥t❤❧② ❏❉ r❛t❡ ✳✵✷✾ ✳✵✸✺ ❇✳ ❋✐r♠s ❉❡❝r❡❛s✐♥❣ r❡t✉r♥s α ✵✳✻✸✷ ▲❛❜♦r s❤❛r❡ ✳✼✻ ✳✼✷ ❱❛❝❛♥❝② r❛t❡ ❡①♣♦♥❡♥t γ✶ ✶✳✹✻ ❊♠♣ s❤❛r❡ ❛❣❡ ✵ ✳✵✸✹ ✳✵✷✵ ❈♦st ❝♦♥st❛♥t ❝ ✶✳✶✼ ❍✐r❡✲❝♦sts ✴ q✬❧② ✇❛❣❡s ✳✻✹ ✳✶✹ ❘❛t✐♦ κ/❝ ✵✳✵✵✵✻ ❆❣❣✳ ✈❛❝❛♥❝② r❛t❡ ✳✸✽ ✳✵✸ ❋✐①❡❞ ❝♦st ♦❢ ❤✐r✐♥❣ κ✵ ✶✳✻✹✵ ❊st❛❜ ❛♥♥ |❣| < ✺%

✳✺✽

✳✹✷ ❖♣❡r❛t✐♥❣ ❝♦st χ ✵✳✶✶✷✻ ❙✉r✈✐✈❡ ✺②rs ✳✺✾ ✳✺✵ ❊①♦❣❡♥♦✉s ❡①✐t r❛t❡ δ ✵✳✵✵✽✻ ❏❉ ❜② ❡①✐t ✳✸✵ ✳✸✺ ❊♥tr② ❝♦st χ✵ ✶✹✳✸✺ ❆♥♥ ❡♥tr② r❛t❡ ✳✶✵ ✳✶✶

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❈❛❧✐❜r❛t✐♦♥

P❛r❛♠❡t❡r ❱❛❧✉❡ ❚❛r❣❡t ▼ ❉ ❈✳ ▲❛❜♦r ♠❛r❦❡t ❈♦♥st❛♥t µ ✵✳✸✻✺ ▼♦♥t❤❧② ❥♦❜ ✜♥❞ r❛t❡ ✳✹✸ ✳✹✺ ❉✳ Pr♦❞✉❝t✐✈✐t② ③✵ ∼ ❊①♣(ξ) ξ ✹✳✵✽ ▼❡❛♥ s✐③❡ ❛❣❡ ✵ ❡st❛❜ ✺✳✶ ✺✳✵ ❆❘✭✶✮ st❞✳ s❤♦❝❦ σ❡ ✵✳✶✷✾ σ(❧♦❣ ♥) ✭❛♥♥✉❛❧✱ ❝♦♥t✳✮ ✳✹✶ ✳✹✷ ❆❘✭✶✮ ♣❡rs✐st❡♥❝❡ ρ ✵✳✾✾✶ ❋r❛❝ ◆ ✐♥ ♥ > ✺✵✵

✳✸✻

✳✹✼

◆♦♥✲t❛r❣❡tt❡❞ ▼ ❉ ❯♥❡♠♣❧♦②♠❡♥t r❛t❡ ✵✳✵✻✸ ✵✳✵✺✷ ❊st❛❜s ♥ ✺✵✵ ✵✳✵✵✺ ✵✳✵✵✹ ❏❈ ❜② ❡♥tr❛♥ts ✵✳✶✸✺ ✵✳✸✸✶ ❊❧❛st✐❝✐t②✿ ❲❛❣❡ ❛♥❞ s✐③❡ ✵✳✶✸✵ ✵✳✶✵✵ ❈♦❡✛ ✈❛r✐❛t✐♦♥ ♥ ✻✳✹✷✹ ✻✳✶✵✵

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❈❛❧✐❜r❛t✐♦♥

P❛r❛♠❡t❡r ❱❛❧✉❡ ❚❛r❣❡t ▼ ❉ ❈✳ ▲❛❜♦r ♠❛r❦❡t ❈♦♥st❛♥t µ ✵✳✸✻✺ ▼♦♥t❤❧② ❥♦❜ ✜♥❞ r❛t❡ ✳✹✸ ✳✹✺ ❉✳ Pr♦❞✉❝t✐✈✐t② ③✵ ∼ ❊①♣(ξ) ξ ✹✳✵✽ ▼❡❛♥ s✐③❡ ❛❣❡ ✵ ❡st❛❜ ✺✳✶ ✺✳✵ ❆❘✭✶✮ st❞✳ s❤♦❝❦ σ❡ ✵✳✶✷✾ σ(❧♦❣ ♥) ✭❛♥♥✉❛❧✱ ❝♦♥t✳✮ ✳✹✶ ✳✹✷ ❆❘✭✶✮ ♣❡rs✐st❡♥❝❡ ρ ✵✳✾✾✶ ❋r❛❝ ◆ ✐♥ ♥ > ✺✵✵

✳✸✻

✳✹✼

◆♦♥✲t❛r❣❡tt❡❞ ▼ ❉ ❯♥❡♠♣❧♦②♠❡♥t r❛t❡ ✵✳✵✻✸ ✵✳✵✺✷ ❊st❛❜s ♥ > ✺✵✵ ✵✳✵✵✺ ✵✳✵✵✹ ❏❈ ❜② ❡♥tr❛♥ts ✵✳✶✸✺ ✵✳✸✸✶ ❊❧❛st✐❝✐t②✿ ❲❛❣❡ ❛♥❞ s✐③❡ ✵✳✶✸✵ ✵✳✶✵✵ ❈♦❡✛ ✈❛r✐❛t✐♦♥ ♥ ✻✳✹✷✹ ✻✳✶✵✵

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❘❡s✉❧ts

✶✳ ❋✐r♠ ❞②♥❛♠✐❝s ✷✳ ❈♦♠♣❛r✐♥❣ st❡❛❞② st❛t❡s ✸✳ ❘❡❝❡ss✐♦♥s ❞✉❡ t♦ ❝❤❛♥❣❡s ✐♥ ♣r♦❞✉❝t✐✈✐t②

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✶✳ ❋✐r♠ ❞②♥❛♠✐❝s

1 2 3 4 5 6 7 8 9 10 5 10 15 20

• A. Average size

1 2 3 4 5 6 7 8 9 10 1.4 1.45 1.5 1.55 1.6

• B. Average productivity

1 2 3 4 5 6 7 8 9 10 0.2 0.4 0.6 0.8 1

• C. Average Effort (hiring)

1 2 3 4 5 6 7 8 9 10 0.2 0.4 0.6 0.8 1

• E. Ineffective Vacancy Rate (V−V

*)/V

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✶✳ ❋✐r♠ ❞②♥❛♠✐❝s

1 2 3 4 5 6 7 8 9 10 0.05 0.1 0.15 0.2 0.25 0.3

• A. Cohort job creation and destruction
• 1. Job creation Rate
• 2. Job destruction Rate

1 2 3 4 5 6 7 8 9 10 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

• B. Type of destruction
• 1. Fires by continuing firms
• 2. Layoffs due to exit

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✷✳ ❙t❡❛❞② st❛t❡s

−0.3 −0.2 −0.1 0.1 0.2 0.3 −0.3 −0.2 −0.1 0.1 0.2 0.3 Fig A. Beveridge Curve Unemployment rate Vacanacy rate −0.02 −0.015 −0.01 −0.005 0.005 0.01 0.015 0.02 −0.6 −0.4 −0.2 0.2 0.4 0.6 Fig B. Productivity and Market Tightness Labor productivity Market tightness Data − 2003:1 − 2007:12 Model − Steady state comparisons Elasticity of θ w/r/t Labor productivity Model 36.43 Data 30.97

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✸✳ ❘❡❝❡ss✐♦♥

2 4 6 8 10 12 14 16 18 −15 −10 −5 5 10 Months Scaled log deviation

• I. DATA (2001)

Market tightness: θ 2 4 6 8 10 12 14 16 18 −15 −10 −5 5 10 Months Scaled log deviation

• II. MODEL

− Transition dynamics for a level change in productivity − Log deviations of variables − Scaled by the log change in labor productivity − Monthly data. 1 = Aug ’08 − Log deviations of variables − Scaled by the log deviation of labor productivity from HP trend

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✸✳ ❘❡❝❡ss✐♦♥

2 4 6 8 10 12 14 16 18 −15 −10 −5 5 10 Months Scaled log deviation

• II. MODEL

1 3 5 7 9 11 13 15 17 18 −15 −10 −5 5 10 Months Scaled log deviation

• I. DATA (2001)

Vacancy−yield: H/V Match efficiency Unemployment rate Vacancy rate Market tightness: θ

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✸✳ ❘❡❝❡ss✐♦♥

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 −40 −30 −20 −10 10 20 Months Scaled log deviation

• I. DATA (1 = Aug−01)
• 1. Vacancy−yield: H/V
• 2. Match efficiency
• 3. Unemployment rate
• 4. Vacancy rate
• 5. Market tightness: θ

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 −40 −30 −20 −10 10 20 Months

• II. DATA (1 = Jan−08)

Scaled log deviation

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❈♦♥❝❧✉s✐♦♥

• Pr❡s❡♥t❡❞ ❛ ♠♦❞❡❧ ♦❢ ✜r♠ ❞②❛♠✐❝s ✇✐t❤ s❡❛r❝❤ ❢r✐❝t✐♦♥s
• ❘❡❝r✉✐t♠❡♥t ❡✛♦rt
• ❘❡♣❧✐❝❛t❡ ❢❛❝ts ❛t t❤❡ ✜r♠ ❛♥❞ ❛❣❣r❡❣❛t❡ ❧❡✈❡❧
• ◆❡①t✿
• ■r♦♥ ♦✉t ❝❛❧✐❜r❛t✐♦♥
• ❈❛❧✐❜r❛t❡ ♠♦❞❡❧ ✇✐t❤ ❜♦rr♦✇✐♥❣
• ❲♦r❦ ♦♥ ❡♠♣✐r✐❝❛❧ ❢❛❝ts r❡❣❛r❞✐♥❣ ✈❛❝❛♥❝② ②✐❡❧❞s ❛♥❞

❡st❛❜❧✐s❤♠❡♥t ❛❣❡

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❊①tr❛ s❧✐❞❡s

❊①tr❛ s❧✐❞❡s ❬Pr❡✈✐♦✉s ♣r❡s❡♥t❛t✐♦♥s❪

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❚❤❡ ❇❡✈❡r✐❞❣❡ ❈✉r✈❡

• P❛✐rs ♦❢ (❯, ❱ ) ❝♦♥s✐st❡♥t ✇✐t❤ ❛ st❛t✐♦♥❛r② ❡q✉✐❧✐❜r✐✉♠ ✐♥ t❤❡

❧❛❜♦r ♠❛r❦❡t s(✶ − ✉)

• ❙❡♣❛r❛t✐♦♥s

= ❆❱ α❯✶−α

• ❍✐r❡s
• ❙❤✐❢t ✐♥ t❤❡ ❇❈ ↔ ♣❡rs✐st❡♥t ❢❛❧❧ ✐♥ ❛❣❣r❡❣❛t❡ ♠❛t❝❤✐♥❣

❡✣❝✐❡♥❝② ❆

✶✳ ▼✐s♠❛t❝❤ ↑ ✷✳ ❲♦r❦❡r✬s s❡❛r❝❤ ❡✛♦rt ↓ ✸✳ ❋✐r♠✬s r❡❝r✉✐t♠❡♥t ❡✛♦rt ↓

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❙t♦r②

❚✇♦ ❢❛❝ts✳✳✳ ✶✳ ❋✐r♠ ❞✐str✐❜✉t✐♦♥ ✐♥ t❤❡ r❡❝❡♥t r❡❝❡ss✐♦♥

• ❚❤❡ r❡❝❡ss✐♦♥ s❛✇ ❤❡❛✈✐❧② r❡str✐❝t❡❞ ❡♥tr② ❛♥❞ ❣r♦✇t❤ ♦❢ s♠❛❧❧

✴ ②♦✉♥❣ ✜r♠s✳

✷✳ ❋✐r♠ ❧❡✈❡❧ ❤✐r✐♥❣

• ❲❤❡♥ ❤✐r✐♥❣✱ ✜r♠s ✉s❡ ♠❛r❣✐♥s ♦t❤❡r t❤❛♥ ✈❛❝❛♥❝✐❡s t♦

❝♦♥✈❡rt ✈❛❝❛♥❝✐❡s ✐♥t♦ ❤✐r❡s✳ ❋❛st ❣r♦✇✐♥❣ ✜r♠s ✉s❡ t❤❡s❡ ♠❛r❣✐♥s ♠♦r❡ ❡①t❡♥s✐✈❡❧②✳ ❉❛✈✐s✱ ❋❛❜❡r♠❛♥ ❛♥❞ ❍❛❧t✐✇❛♥❣❡r ✭◗❏❊✱ ✷✵✶✸✮

• ❲❤② ✐s ❛ q✉❛♥t✐t❛t✐✈❡ ♠♦❞❡❧ ♦❢ t❤✐s ❝❤❛♥♥❡❧ ✐♠♣♦rt❛♥t❄
• P♦❧✐❝② ❙✉❣❣❡sts ❢♦❝✉s ♦♥ ♣r♦♠♦t✐♥❣ ❣r♦✇t❤ ♦❢ s♠❛❧❧ ✴ ②♦✉♥❣

✜r♠s✳ ■♥❞❡♣❡♥❞❡♥t ♦❢ ♠✐s♠❛t❝❤✱ ❝❤❛♥❣❡ ✐♥ ✬♥❛t✉r❛❧ r❛t❡✬ ❛r❣✉♠❡♥ts✳

• ❚❤❡♦r② ▲✐♥❦✐♥❣ ✜♥❛♥❝✐❛❧ ❝r✐s❡s t♦ ❧❛❜♦r ♠❛r❦❡ts✳

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❋❛❝t✿ ●r♦✇t❤ r❛t❡s ❛♥❞ ❥♦❜✲✜❧❧✐♥❣ r❛t❡s

• ❋❛❝t ❏♦❜✲✜❧❧✐♥❣ r❛t❡ (❢✐t = qt❡✐t) ✐s ✐♥❝r❡❛s✐♥❣ ✐♥ t❤❡ ❣r♦✇t❤

r❛t❡ (❣✐t,)✳ ❉❛✈✐s✱ ❍❛❧t✐✇❛♥❣❡r ❛♥❞ ❋❛❜❡r♠❛♥ ✭◗❏❊✱ ✷✵✶✸✮ ❧♦❣ ❢✐,t = −✹.✷ + ✵.✽✷ ❧♦❣ ❣✐t

0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35 0.40 0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0 45.0 50.0 55.0

• 30.0 -25.0 -20.0 -15.0 -10.0
• 5.0

0.0 5.0 10.0 15.0 20.0 25.0 30.0 Daily Job-Filling Rate Percent of Employment Monthly Employment Growth Rate (Percent of Employment) MonthlyVacancyFlow Rate (Le Axis) Daily Job-FillingRate (Right Axis) Daily Job-FillingRate, Controlling for Estab.FixedEffects (RightAxis)

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

❋❛❝t✿ ❨♦✉♥❣ ✜r♠ ❏♦❜ ❈r❡❛t✐♦♥

• ❋❛❝t ❨♦✉♥❣ ✜r♠ ❥♦❜✲❝r❡❛t✐♦♥ ❢❡❧❧ ❜② ♠♦r❡ r❡❧❛t✐✈❡ t♦ t❤❛t ♦❢

♦❧❞ ✜r♠s ❛♥❞ ❤❛s r❡♠❛✐♥❡❞ ❜❡❧♦✇ tr❡♥❞✳

7 8 9 10 11 Jobs Created (millions) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Year Old Firms Young Firms (<=3 yo)

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

▼♦❞❡❧ ✲ ■♥❣r❡❞✐❡♥ts

▼♦❞❡❧ ❊①♣❛♥❞ ♦♥ ❊❧s❜② ❛♥❞ ▼✐❝❤❛❡❧s ✭✷✵✶✸✮

• [] ❋✐r♠ ❧❡✈❡❧ ❤❡t❡r♦❣❡♥❡✐t② ✐♥ s✐③❡ ❛♥❞ ♣r♦❞✉❝t✐✈✐t② ① = (♥, ③)
• [] ▼✉❧t✐✲✇♦r❦❡r ✜r♠s ✇✐t❤ ❞❡❝r❡❛s✐♥❣ r❡t✉r♥s ❋(♥, ③) = ③♥α
• [] ❙❡❛r❝❤ ❢r❛♠❡✇♦r❦ ❤ = q(θ)✈
• [] ❈❛❧✐❜r❛t❡❞ t♦ ♠❛t❝❤ ✇✐❞❡ r❛♥❣❡ ♦❢ ❝r♦ss✲s❡❝t✐♦♥❛❧ ❢❛❝ts
• [+] ❘❡❝r✉✐t♠❡♥t ❡✛♦rt ❤ = q(θ)❡✈
• [+] ❈♦♥str❛✐♥t ♦♥ ❞✐✈✐❞❡♥❞s ❉ ≥ ✵
• [+] ❉❡❜t ① = (♥, ❜, ③)
• [+] ❉❡❢❛✉❧t ❛♥❞ ❡♥❞♦❣❡♥♦✉s ♣r✐❝❡ ♦❢ ❞❡❜t ◗(♥′, ❜′, ③)

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✶✳ ❋✐r♠ ❧❡✈❡❧ ❤✐r✐♥❣

• ❙t❛♥❞❛r❞ ♠❛t❝❤✐♥❣ ♠♦❞❡❧ ♦❢ ✜r♠ ❧❡✈❡❧ ❤✐r✐♥❣

❤✐,t = q(θt)✈✐,t, θt = ˆ ✈✐,t❞λt

• /❯t = ❱t/❯t

❢✐,t = ❤✐,t/✈✐,t = q(θt) ❋❛❝t ✭❉❛✈✐s✱ ❋❛❜❡r♠❛♥✱ ❍❛❧t✐✇❛♥❣❡r✱ ◗❏❊ ✷✵✶✸✮ ❧♦❣ ❢✐ t

✵

✵ ✽✷ ❧♦❣ ❣✐ t ❯♥❞❡r t❤❡ st❛♥❞❛r❞ ♠❛t❝❤✐♥❣ ❢r❛♠❡✇♦r❦

✶

✵✳ ❚❤❡♦r② ❑❛ss ❛♥❞ ❑✐r❝❤❡r ✭✷✵✶✶✮ ✐s t❤❡ ♦♥❧② ♣❛♣❡r t♦ ♠❛t❝❤ t❤✐s✱ ❜✉t ✇✐t❤ ❝♦✉♥t❡r❢❛❝t✉❛❧ ✐♠♣❧✐❝❛t✐♦♥s ❢♦r ✇❛❣❡ ❞✐s♣❡rs✐♦♥ ✴ ✉♥❡♠♣❧♦②♠❡♥t ❞✉r❛t✐♦♥✳

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✶✳ ❋✐r♠ ❧❡✈❡❧ ❤✐r✐♥❣

• ❙t❛♥❞❛r❞ ♠❛t❝❤✐♥❣ ♠♦❞❡❧ ♦❢ ✜r♠ ❧❡✈❡❧ ❤✐r✐♥❣

❤✐,t = q(θt)✈✐,t, θt = ˆ ✈✐,t❞λt

• /❯t = ❱t/❯t

❢✐,t = ❤✐,t/✈✐,t = q(θt)

• ❋❛❝t ✭❉❛✈✐s✱ ❋❛❜❡r♠❛♥✱ ❍❛❧t✐✇❛♥❣❡r✱ ◗❏❊ ✷✵✶✸✮

❧♦❣ ❢✐,t = β✵ + ✵.✽✷ ❧♦❣ ❣✐,t ❯♥❞❡r t❤❡ st❛♥❞❛r❞ ♠❛t❝❤✐♥❣ ❢r❛♠❡✇♦r❦ β✶ = ✵✳

• ❚❤❡♦r② ❑❛ss ❛♥❞ ❑✐r❝❤❡r ✭✷✵✶✶✮ ✐s t❤❡ ♦♥❧② ♣❛♣❡r t♦ ♠❛t❝❤

t❤✐s✱ ❜✉t ✇✐t❤ ❝♦✉♥t❡r❢❛❝t✉❛❧ ✐♠♣❧✐❝❛t✐♦♥s ❢♦r ✇❛❣❡ ❞✐s♣❡rs✐♦♥ ✴ ✉♥❡♠♣❧♦②♠❡♥t ❞✉r❛t✐♦♥✳

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✶✳ ❋✐r♠ ❧❡✈❡❧ ❤✐r✐♥❣

• ▼♦❞✐✜❡❞ ♠❛t❝❤✐♥❣ ♠♦❞❡❧ ♦❢ ✜r♠ ❧❡✈❡❧ ❤✐r✐♥❣

❤✐,t = q(θ∗

t )❡✐,t✈✐,t,

θ∗

t =

ˆ ❡✐t✈✐,t❞λt

• /❯t = ❱ ∗

t /❯t

• ■♠♣❧✐❝❛t✐♦♥s ❢♦r ♠❡❛s✉r❡❞ ❛❣❣r❡❣❛t❡ ♠❛t❝❤ ❡✣❝✐❡♥❝② Φt

❍t = q(θ∗

t ) ˜

❱t = ❱ ∗

t

❱t ✶−φ ❯φ

t ❱ ✶−φ t

Φt = ˆ ❡✐,t ✈✐,t ❱t ❞λt ✶−φ ✶✳ ❈r♦ss✲s❡❝t✐♦♥ ❢✐,t = q(θ∗

t )❡✐,t s♦ ✐❢ ❡✐,t ✐s ✐♥❝r❡❛s✐♥❣ ✐♥ ❣✐,t t❤✐s

♠♦❞❡❧ ♠❛② ❜❡ ❝♦♥s✐st❡♥t ✇✐t❤ ❉❋❍✳ ✷✳ ❚✐♠❡✲s❡r✐❡s ❆ s❤✐❢t ✐♥ λt ❛✇❛② ❢r♦♠ ❤✐❣❤ ❣✐,t ✜r♠s r❡❞✉❝❡s Φt✳

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✷✳ ❋✐r♠ ❞✐str✐❜✉t✐♦♥ ✐♥ t❤❡ r❡❝❡ss✐♦♥

• ❋❛❝t ❚❤❡ ✷✵✵✼✲✷✵✵✾ r❡❝❡ss✐♦♥ ❧❡❛❞ t♦ ❞❡♣r❡ss❡❞ ✜r♠ ❡♥tr②

❛♥❞ ❛ s❤✐❢t ✐♥ t❤❡ ✜r♠ ❛❣❡ ❞✐str✐❜✉t✐♦♥

◆♦t❡s✿ ❊♥tr② ❛♥❞ ❡①✐t r❛t❡ ❛r❡ ✐♥ ❉❋❍ ❢♦r♠✳ ❍✐st♦r✐❝❛❧ r❡❝❡ss✐♦♥s ❛r❡ ✶✾✽✵✱ ✶✾✾✶✱ ✷✵✵✵✳ ❊♠♣❧♦②♠❡♥t ♥♦r♠❛❧✐③❡❞ t♦ ✶✵✵✱ ✉♥✜❧t❡r❡❞✱ ❛♥♥✉❛❧ ❞❛t❛✳ ❙♦✉r❝❡✿ ❇✉s✐♥❡ss ❉②♥❛♠✐❝s ❙✉r✈❡②

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✷✳ ❋✐r♠ ❞✐str✐❜✉t✐♦♥ ✐♥ t❤❡ r❡❝❡ss✐♦♥

• ❋❛❝t ❚❤❡ ✷✵✵✼✲✷✵✵✾ r❡❝❡ss✐♦♥ ❧❡❛❞ t♦ ❛ s❤✐❢t ✐♥ t❤❡ ✜r♠ s✐③❡

❞✐str✐❜✉t✐♦♥

❚❛❜❧❡✿ ❈❤❛♥❣❡ ✐♥ ❋✐r♠ ❙✐③❡ ❉✐str✐❜✉t✐♦♥

❙✐③❡ ◆✉♠❜❡r ♦❢ ❋✐r♠s ✪ ❈❤❛♥❣❡ ♥✉♠❜❡r ♦❢ ✜r♠s ✷✵✵✼ ✷✵✵✼✲✷✵✵✾ ✶✲✹✾ ✺✱✵✾✺✱✺✶✷ ✲✸✳✾✻ ✺✵✲✹✾✾ ✷✶✾✱✽✹✺ ✲✹✳✾✽ ✺✵✵✰ ✷✵✱✻✺✽ ✲✶✳✾✺

◆♦t❡s✿ ❙♦✉r❝❡✿ ❇✉s✐♥❡ss ❉②♥❛♠✐❝s ❙✉r✈❡②

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

✷✳ ❋✐r♠ ❞✐str✐❜✉t✐♦♥ ✐♥ t❤❡ r❡❝❡ss✐♦♥

• ❋❛❝t ❚❤❡ ✷✵✵✼✲✷✵✵✾ r❡❝❡ss✐♦♥ ❧❡❛❞ t♦ ❛ ❞✐✛❡r❡♥t s❤✐❢t ✐♥ t❤❡

❡♠♣❧♦②♠❡♥t ❞✐str✐❜✉t✐♦♥ ♦✈❡r ✜r♠s r❡❧❛t✐✈❡ t♦ ♣❛st r❡❝❡ss✐♦♥s✳

◆♦t❡s✿ ❙♠❛❧❧ ♥ < ✺✵✱ ▲❛r❣❡ ♥ > ✺✵✵✳ ❍✐st♦r✐❝❛❧ r❡❝❡ss✐♦♥s ❛r❡ ✶✾✽✵✱ ✶✾✾✶✱ ✷✵✵✵✳ ❊♠♣❧♦②♠❡♥t ♥♦r♠❛❧✐③❡❞ t♦ ✶✵✵✱ ✉♥✜❧t❡r❡❞✱ ❛♥♥✉❛❧ ❞❛t❛✳ ❙♦✉r❝❡✿ ❇✉s✐♥❡ss ❉②♥❛♠✐❝s ❙✉r✈❡②

■♥tr♦❞✉❝t✐♦♥ ▼♦❞❡❧ ❈❛❧✐❜r❛t✐♦♥ ❘❡s✉❧ts

Pr♦♣♦s❡❞ ♠❡❝❤❛♥✐s♠

Φt = ˆ ❡(❣✐,t)✈✐,t ❱t ❞λt ✶−φ ✶✳ ❆❣❣r❡❣❛t❡ s❤♦❝❦ ✇❤✐❝❤ ❛❞✈❡rs❡❧② ❛✛❡❝ts ❡♥tr② ❛♥❞ ②♦✉♥❣ ✜r♠s

• ❙✉♣♣♦s❡ t❤✐s ✐s ❛ ✜♥❛♥❝✐❛❧ s❤♦❝❦✱ ♣r❡✈✐♦✉s r❡❝❡ss✐♦♥s ❝❛✉s❡❞ ❜②

❚❋P

✷✳ ❉❡❝r❡❛s❡❞ ❡♥tr②✱ ❤✐❣❤ ❡①✐t ♦❢ ②♦✉♥❣ ✜r♠s ✸✳ ❙❤✐❢t ✐♥ ❞✐str✐❜✉t✐♦♥ ♦❢ ✜r♠s ❛♥❞ ❡♠♣❧♦②♠❡♥t t♦ ❧❛r❣❡✱ ♦❧❞✱ ❧♦✇ ❣r♦✇t❤ ✜r♠s ✹✳ ❉❡❝r❡❛s❡ ✐♥ ❛❣❣r❡❣❛t❡ ♠❛t❝❤ ❡✣❝✐❡♥❝② ✺✳ ❖✉t✇❛r❞ s❤✐❢t ✐♥ ❇❡✈❡r✐❞❣❡ ❝✉r✈❡ ❆✐♠ ❊①❛♠✐♥❡ t❤❡ ✈❛❧✐❞✐t② ✭♠❛❣♥✐t✉❞❡s✮ ♦❢ t❤✐s ❝❤❛♥♥❡❧ ✐♥ ❛ q✉❛♥t✐t✐❛t✐✈❡ ❢r❛♠❡✇♦r❦✳