Research Discussion Papers, Bank of Finland
No 15/2009:
Productivity and job flows: Heterogeneity of new hires and continuing jobs in the business cycle
Juha Kilponen ()
and Juuso Vanhala ()
Abstract: This paper focuses on productivity dynamics of a
firm-worker match as a potential explanation for the ‘unemployment
volatility puzzle’. We let new matches and continuing jobs differ in terms
of productivity level and sensitivity to aggregate productivity shocks. As
a result, new matches have a higher destruction rate and lower, but more
volatile, wages than old matches, as new hires receive technology
associated with the latest vintage. In our model, an aggregate productivity
shock generates a persistent productivity difference between the two types
of matches, creating an incentive to open new productive vacancies and to
destroy old matches that are temporarily less productive. The model
produces a well behaved Beveridge curve, despite endogenous job destruction
and more volatile vacancies and unemployment, without needing to rely on
differing wage setting mechanisms for new and continuing jobs.
Keywords: matching; productivity shocks; new hires; continuing jobs; job flows; Beveridge curve; vintage structure; (follow links to similar papers)
JEL-Codes: E24; E32; J64; (follow links to similar papers)
48 pages, July 1, 2009
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- This paper is published as:
-
Kilponen, Juha and Juuso Vanhala, (2014), 'Sensitivity of Job Destruction to Vintage and Tenure Effects', The Scandinavian Journal of Economics, Vol. 116, October, No. 4, pages 1068-1090
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