American Economic Journal:
Macroeconomics
ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)
Exogenous versus Endogenous Separation
American Economic Journal: Macroeconomics
(pp. 68–93)
Abstract
This paper assesses how various approaches to modeling the separation margin affect the quantitative ability of the Mortensen-Pissarides labor matching model. The model with a constant separation rate fails to produce realistic volatility and productivity responsiveness of the separation rate and worker flows. The specification with endogenous separation succeeds along these dimensions. Allowing for on-the-job search enables the model to replicate the Beveridge curve. All specifications, however, fail to generate sufficient volatility of the job finding rate. While adopting the Hagedorn-Manovskii calibration remedies this problem, the volume of job-to-job transitions in the on-the-job search specification becomes essentially zero. (JEL E24, J41, J64)Citation
Fujita, Shigeru, and Garey Ramey. 2012. "Exogenous versus Endogenous Separation." American Economic Journal: Macroeconomics 4 (4): 68–93. DOI: 10.1257/mac.4.4.68Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital
- J41 Labor Contracts
- J64 Unemployment: Models, Duration, Incidence, and Job Search