Postel-Vinay, Fabien; Moscarini, Giuseppe; (2024) On the Job Search and Business Cycles. Revue économique , 75 (1) pp. 73-112. 10.3917/reco.751.0073.

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Abstract

We propose a highly tractable way of analyzing business cycles in an environment with random job search both off- and on-the-job (OJS). Heterogeneity in productivity across jobs generates a job ladder. Firms Bertrand-compete for employed workers, as in the Sequential Auctions protocol of Postel-Vinay and Robin (2002). We identify three channels through which OJS amplifies and propagates aggregate shocks: (i) a higher estimated elasticity of the matching function when allowing for OJS; (ii) the differential returns to hiring employed and unemployed job applicants, whose proportions naturally vary over the business cycle; (iii) the slow reallocation of workers through OJS across rungs of the job ladder, generating endogenous, slowly evolving opportunities for further poaching, which feed back on job creation incentives.

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