Establishments Dynamics, Vacancies and Unemployment: A Neoclassical Synthesis

This paper develops a Walrasian equilibrium theory of establishment dynamics and matching frictions and uses it to analyze business cycle fluctuations. Two scenarios are considered: one in which the matching process is subject

to congestion externalities and another in which it is not. The paper finds that the scenario with congestion externalities replicates U.S. business cycle dynamics

much better than the scenario with efficient matching.

For more information, contact Harold Cole.