Institutional Affiliation: Federal Reserve Bank of Minneapolis
|Jacks of All Trades and Masters of One: Declining Search Frictions and Unequal Growth|
with : w27758
Declining search frictions generate productivity growth by allowing workers to find jobs for which they are better suited. The return of declining search frictions on productivity varies across different types of workers. For workers who are “jacks of all trades”—in the sense that their productivity is nearly independent from the distance between their skills and the requirements of their job’ declining search frictions lead to minimal productivity growth. For workers who are “masters of one trade”—in the sense that their productivity is very sensitive to the gap between their individual skills and the requirements of their job—declining search frictions lead to fast productivity growth. As predicted by this view, we find that workers in routine occupations have low wage dispersion and gro...
|Revisiting the Hypothesis of High Discounts and High Unemployment|
with , : w27428
We revisit the hypothesis that cyclical fluctuations in unemployment are caused by shocks to the discount rate. We use a rich search-theoretic model of the labor market in which the UE, EU and EE rates are all endogenous. Analytically, we show that an increase in the discount rate lowers the UE rate and, under some natural conditions, it lowers the EU rate. Quantitatively, we show that an increase in the discount rate from 4 to 10% generates a 3.5% decline in the UE rate and a 6% decline in the EU rate. The response of the unemployment rate is minuscule. These findings are at odds with the actual behavior of the US labor market over the business cycle, which features a negative comovement between the UE and EU rates and large unemployment fluctuations. We show that aggregate productivity s...
|Declining Search Frictions, Unemployment and Growth|
with : w24518
Over the last century, unemployment, vacancy, job-finding and job-loss rates as well as the Beveridge curve have no trend. Yet, the last century has seen the development and diffusion of many information technologies—such as telephones, fax machines, computers, the Internet—which presumably have increased the efficiency of search in the labor market. We explain this phenomenon using a textbook search-theoretic model of the labor market. We show that there exists an equilibrium in which unemployment, vacancies, job-finding and job-loss rates are constant while the search technology improves over time if and only if firm-worker matches are heterogeneous in quality, the distribution of match qualities is Pareto, and the quality of a match is observed before the start of the employment relatio...