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On the Dynamics of unemployment and wage Distributions

Author

Listed:
  • Jean-Marc Robin

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique)

Abstract
Postel-Vinay and Robin's (2002) sequential auction model is extended to allow for aggregate productivity shocks. Workers exhibit permanent differences in ability while firms are identical. Negative aggregate productivity shocks induce job destruction by driving the surplus of matches with low ability workers to negative values. Endogenous job destruction coupled with worker heterogeneity thus provides a mechanism for amplifying productivity shocks that offers an original solution to the unemployment volatility puzzle (Shimer (2005)). Moreover, positive or negative shocks may lead employers and employees to renegotiate low wages up and high wages down when agents' individual surpluses become negative. The model delivers rich business cycle dynamics of wage distributions and explains why both low wages and high wages are more procyclical than wages in the middle of the distribution.

Suggested Citation

  • Jean-Marc Robin, 2011. "On the Dynamics of unemployment and wage Distributions," Post-Print hal-01024463, HAL.
    • Handle: RePEc:hal:journl:hal-01024463
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-01024463
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    File URL: https://sciencespo.hal.science/hal-01024463/document
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    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Hélène Turon, 2007. "The Public Pay Gap in Britain: Small Differences That (Don't?) Matter," Economic Journal, Royal Economic Society, vol. 117(523), pages 1460-1503, October.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    3. repec:hal:spmain:info:hdl:2441/c8dmi8nm4pdjkuc9g8grh35j2 is not listed on IDEAS
    4. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    5. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Post-Print hal-03458567, HAL.
    6. Giuseppe Moscarini & Fabien Postel-Vinay, 2009. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," NBER Chapters, in: NBER Macroeconomics Annual 2008, Volume 23, pages 1-51, National Bureau of Economic Research, Inc.
    7. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms985085gkbp is not listed on IDEAS
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