Productivity shocks lead to job switches, impacting labor market dynamics
This paper explores how changes in productivity can impact the job market by influencing the likelihood of workers switching jobs. When productivity is high, even low-quality job matches become more valuable, leading to more job changes. This results in a pattern of job transitions that follows the ups and downs of the economy. The researchers used simulations to show that their model matches real-world data on unemployment, job vacancies, and market conditions in the U.S. They also found that the model explains why unemployment and job vacancies tend to move in opposite directions during economic cycles.