The response of employment and wages to aggregate shocks: On-the-job search effect

The purpose of the paper is to study and quantify the possible importance of on-the-job for the fluctuations in the job finding rate within an alternative market equilibrium framework to that of the Diamond–Mortensen–Pissarides model recently introduced by Coles and Mortensen (2013). In the process we show that the Coles–Mortensen model can easily explain the magnitudes of worker flow fluctuation reported by Shimer (2005) for the 50 year post WWII period in the U.S. as well as the observed real wage rigidity.