Search Frictions: Matching Aggregate and Establishment Observations

Russell Cooper, John C. Haltiwanger, and Jonathan Willis , Journal of Monetary Economics 54 , 56-78 , September 2007.

We estimate a search model to match hours, employment, vacancies and unemployment at the micro- and macrolevels. We establish a set of facts concerning the variability of unemployment and vacancies in the aggregate and the distribution of net employment growth and the comovement of hours and employment growth at the establishment level. A search model with non-convex costs of posting vacancies, establishment-level profitability shocks and a contracting framework to set hours provides a structure to understand these observations. The estimated model is able to capture both the aggregate and establishment-level facts.

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