Axtell, RL;
Guerrero, OA;
Lopez, E;
(2019)
Frictional unemployment on labor flow networks.
Journal of Economic Behavior & Organization
, 160
pp. 184-201.
10.1016/j.jebo.2019.02.028.
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Abstract
We develop an alternative theory to the aggregate matching function in which workers search for jobs through a network of firms: the labor flow network. The lack of an edge between two companies indicates the impossibility of labor flows between them due to high frictions. In equilibrium, firms’ hiring behavior correlates through the network, generating highly disaggregated local unemployment. Hence, aggregation depends on the topology of the network in non-trivial ways. This theory provides new micro-foundations for the Beveridge curve, wage dispersion, and the employer-size premium. We apply our model to employer-employee matched records and find that network topologies with Pareto-distributed connections cause disproportionately large changes on aggregate unemployment under high labor supply elasticity.
| Type: | Article |
|---|---|
| Title: | Frictional unemployment on labor flow networks |
| Open access status: | An open access version is available from UCL Discovery |
| DOI: | 10.1016/j.jebo.2019.02.028 |
| Publisher version: | https://doi.org/10.1016/j.jebo.2019.02.028 |
| Language: | English |
| Additional information: | This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions. |
| Keywords: | Labor flows, Networks, Unemployment, Aggregation, Job search |
| UCL classification: | UCL UCL > Provost and Vice Provost Offices > UCL SLASH UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics |
| URI: | https://discovery.ucl.ac.uk/id/eprint/10078257 |
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