The title of paper is Long Live the Vacancy

Abstract: We reassess the role of vacancies in a Diamond-Mortensen-Pissarides style search and matching model. Long-lived vacancies and endogenous job separations together with alternating offer bargaining greatly improve the ability of the model to replicate key stylized labor market facts. The model explains not only standard deviations and autocorrelations of labor market variables, but also their dynamic correlations. The model is consistent with a large surplus both on the worker and the firm side, and generates a wage response to productivity shocks that is in line with empirical evidence on the wage dynamics of new matches. With only one shock, the model captures the dynamics of the US labor market from 1951 to 2014 surprisingly well.

Organisers: Federico Rossi, Christine Braun & Marta Santamaria