Shimer (2005) argues that the Mortensen-Pissarides (MP) model of unemployment lacks an amplification mechanism because it generates less than 10 percent of the observed business cycle fluctuations in unemployment given labor productivity shocks of plausible magnitude. This paper argues that part...

This paper presents new empirical evidence on the cyclical behavior of US unemployment that poses a challenge to standard search and matching models. The correlation between cyclical unemployment and the cyclical component of labor productivity switched sign in the mid 80s: from negative it...

This paper presents a framework to interpret movements in the Beveridge curve and analyze unemployment fluctuations. We decompose the unemployment rate into three main components: (1) a component driven by changes in labor demand--movements along the Beveridge curve and shifts in the Beveridge...

This paper presents a framework to study movements in the matching efficiency of the labor market and highlights two observable factors affecting matching efficiency: (i) unemployment composition and (ii) dispersion in labor market conditions, the fact that tight labor markets coexist with slack...

This paper presents a search model of unemployment with a new mechanism of job separation based on firms' demand constraints. The model is consistent with the cyclical behavior of labor market variables and can account for three stylized facts about unemployment that the Mortensen-Pissarides...