This paper studies the consequences of creative destruction on unemployment in a frictional labor market with on-the-job search. For a benchmark calibration, a 1% increase in growth raises the unemployment rate by 1.72 percentage points in the economy without on-the-job search and by only 0.07...

Shimer (2005) demonstrated that aggregate productivity shocks in a standard matching model cause fluctuations in key labor market statistics---such as the job-finding rate, the vacancy/unemployment ratio, and the unemployment rate---that are too small by an order of magnitude. This paper shows...

Shimer (2005a) argues that the textbook equilibrium search model of unemployment explains less than 10% of the volatility in U.S. vacancies and unemployment when fluctuations are driven by productivity shocks. His paper as well as other recent work inspired by it are reviewed and extended here....

Propagation in equilibrium models of search unemployment is altered when vacancy costs require some external financing on frictional credit markets. The easing of financing constraints during an expansion as firms accumulate net worth reduces the opportunity cost for resources allocated to job...

The standard Real Business Cycle literature mainly focuses on Walrasian models designed to fit the US institutional framework. Differences between the US and Europe, mostly evident in the labor market, suggest that a purely Walrasian model may be inappropriate to study European business cycles....

We demonstrate that inference from estimated structural News Driven Business Cycle (NDBC) models about the main drivers of fluctuations in macroeconomic variables and asset prices is sensitive to assumptions about the structure of the news shock processes. We show that, when data on asset prices...

We develop a life-cycle model of the labor market in which different worker-firm matches have different quality and the assignment of the right workers to the right firms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment...

New technology embodied in capital equipment can be adopted either through destruction of existing jobs and the creation of new ones or by renovation, updating the job's equipment. Under the assumption that the destruction of jobs generates worker layoffs, we show that higher productivity growth...

We consider the dynamic relationship between product market entry regulation and equilibrium unemployment. The main theoretical contribution is combining a job matching model with monopolistic competition in the goods market and individual bargaining. We calibrate the model to US data and...

We study the effects of firing taxes on labor market outcomes. These taxes, more common in European markets, include all administrative and procedural costs incurred by the firm. As such, they are independent of the dismissed worker's skill level. We establish that, for young workers,...