Wage Posting and Business Cycles: a Quantitative Exploration

Giuseppe Moscarini (1) , Fabien Postel-Vinay (2, 3, 4, 5, 6, 7, 8, 9, 10, 11)

1 Yale University [New Haven]
2 ECON - Département d'économie (Sciences Po)
3 CREST - Centre de Recherche en Économie et Statistique
4 LEA - Laboratoire d'Economie Appliquée
5 Department of Economics
6 PJSE - Paris Jourdan Sciences Economiques
7 CEPR - Center for Economic Policy Research
8 Departement of Economics - University of Bristol
9 IZA - Institute for the Study of Labor
10 DELTA - Département et Laboratoire d'Economie Théorique et Appliquée
11 INRA

We provide a quantitative exploration of business cycles in a frictional labor market under contract-posting. The steady-state random search and wage-posting model of Burdett and Mortensen (1998) has become the canonical structural framework for empirical analysis of worker turnover and equilibrium wage dispersion. In this paper, we provide an efficient algorithm to simulate a dynamic stochastic equilibrium version of this model, the Stochastic Burdett-Mortensen (SBM) model, and evaluate its performance against empirical evidence on fluctuations in unemployment, vacancies and wages.

Keywords: Equilibrium Job Search; Dynamic Contracts; Stochastic Dynamics; Business Cycles

Domains: Humanities and Social Sciences; Economics and Finance

Giuseppe Moscarini, Fabien Postel-Vinay. Wage Posting and Business Cycles: a Quantitative Exploration. 2014. ⟨hal-03460143⟩