Separation costs, job heterogeneity and labor market volatility in the matching model

This paper extends the standard matching model by introducing a gap in separation costs between entrant and incumbent workers. We show that when this gap is omitted from the model, these costs do not improve the labor market volatility without introducing unrealistic unemployment responses to unempl...

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Bibliographic Details
Published in:Economics letters 2008-10, Vol.101 (1), p.77-79
Main Authors: Silva, José I., Toledo, Manuel
Format: Article
Language:English
Subjects:
Business cycles
Equilibrium models
Insider–outsider
Labor markets
Labor markets Matching Insider-outsider Separation costs Business cycles
Labour market
Matching
Search theory
Separation costs
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Description
Summary:This paper extends the standard matching model by introducing a gap in separation costs between entrant and incumbent workers. We show that when this gap is omitted from the model, these costs do not improve the labor market volatility without introducing unrealistic unemployment responses to unemployment benefits.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2008.06.003