JOB CREATION AND JOB DESTRUCTION IN THE THEORY OF UNEMPLOYMENT

In this paper we model a job-specific shock process in the matching mo del of unemployment with non-cooperative wage behaviour. We obtain end ogenous job creation and job destruction processes and study their pro perties, We show that an aggregate shock induces negative correlation between job creation and job destruction whereas a dispersion shock in duces positive correlation. The job destruction process is shown to ha ve more volatile dynamics than the job creation process. In simulation s we show that an aggregate shock process proxies reasonably well the cyclical behaviour of job creation and job destruction in the United S tates.