Standard business cycle models with search and matching frictions in the labour market increasingly rely on the assumption that firms face hiring, as opposed to, search costs in recruiting workers. We show that although this modification improves the model’s empirical performance, it causes the matching function to play no role in macroeconomic dynamics. Assuming both costs can overcome this shortcoming, but for reasonable parameter values it implies that matching efficiency shocks have no effects.
CORE (COnnecting REpositories)
CORE (COnnecting REpositories)