Business cycles and on the job search

20 May 2016

We study steady state and business cycle properties of a model with heterogeneous firms and on-the-job search in the spirit of Moscarini and Postel-Vinay (2012). We extend the setup by including capital in the production function and show how this change influences model properties. The model is solved using a novel numerical method, projection within perturbation, which uses Chebyshev polynomial approximation and Clenshaw-Curtis quadrature for dealing with heterogeneity. We analyze worker flows between firms, distribution of firm size and wages, and study how productivity and other shocks affect them. When we introduce a working capital channel into the model we find that costly borrowing that finances firms’ wage and vacancy bill shifts the distribution of firms to the right.

keywords: job search, business cycle, unemployment, computation method, heterogeneous firms
JEL codes: 
publication year: 2016
language: english
Publications category:  ,
publishing series: IBS Working Paper
publication number: 07/2016
ISSN: 2451-4373
Additional information:

This research was financed by the Polish National Science Centre grant following decision number: DEC-2011/03/B/HS4/05895.

Projects related to this publication:

National Bank of Poland

Institute for Structural Research (IBS); SGH Warsaw School of Economics

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