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Journal article

Job creation and job destruction in the theory of unemployment


In this paper we model a job-specific shock process in the matching model of unemployment with non-cooperative wage behaviour. We obtain endogenous job creation and job destruction processes and study their properties. We show that an aggregate shock induces negative correlation between job creation and job destruction whereas a dispersion shock induces positive correlation. The job destruction process is shown to have more volatile dynamics than the job creation process. In simulations we show that an aggregate shock process proxies reasonably well the cyclical behaviour of job creation and job destruction in the United States.


Dale T. Mortensen and Christopher A. Pissarides

1 July 1994


The Review of Economic Studies 61(3) , pp.397-415, 1994


DOI: 10.2307/2297896

https://academic.oup.com/restud/article-lookup/doi/10.2307/2297896

This Journal article is published under the centre's Labour markets programme.

This publication comes under the following theme: Unemployment and job search