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How Important are Search Frictions for Employment Dynamics? *

By Mikael Carlsson A, Stefan Eriksson B and Nils Gottfries C


We formulate a model of employment with search frictions, convex adjustment costs, and imperfect competition in the product market. We derive a structural equation for job creation, which is estimated on firm-level data. The results show that real wage costs and product market demand are important for employment dynamics. There is no evidence that unemployed workers contribute to job creation, as would be expected if search frictions were important for medium term employment dynamics

Topics: Search-Matching, Job Creation, Unemployment, Labor Demand JEL classification, E24, J23, J64. * We are grateful for comments from Ilan Cooper, Gernot Doppelhofer, Per-Anders Edin, Peter
Year: 2008
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