THE CYCLICAL BEHAVIOR OF JOB AND WORKER FLOWS

Job and worker flows in the U.S. and Europe have the following properties: Large and negatively correlated gross job creation and job destruction flows. Procyclical quits and countercyclical flows into and out of unemployment. Mortensen and Pissarides (1991, 1993) present a stochastic dynamic equilibrium model of labor market activity designed to explain these regularities. A parameterized and calibrated generalization of their model is studied here, one which incorporates search by employed workers. A demonstration that a single source of macro disturbance is consistent with the observed magnitudes of the comovements and fluctuations observed is the principal contribution of the paper.