published as 'Worker Flows, Job Flows and Unemployment in a Matching Model' in: European Economic Review, 2010, 54 (3), 393-408
This paper uses the search and matching framework to explore the impact of employed job
search on the labour market. The specific features of our model are endogenous employed
job search, flows in and out of the labour force, endogenous job destruction and
heterogenous job creation. Also, job flows and workers flows do not coincide as we allow for
job-to-job flows and labour force entries and exits. Employed job search is shown to have a
substantial impact on unemployment dynamics but a negligible one on the level of
unemployment. More on-the-job search leads to lower unemployment inflow and outflow, i.e.
a more stagnant unemployment pool. With employed job search, the stock of vacancies is
more cyclically sensitive, the unemployment outflow less cyclically sensitive and the
unemployment inflow more cyclically sensitive than without employed job search. With our
model, the impact of a change in unemployment benefit does not only occur through the
conventional decrease in the unemployment outflow rate, but also through an increase in the
unemployment inflow rate. The calibrated version of our model replicates well the cyclical
behaviour of job and worker flows observed in the data.
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