Incorporating a Job Search & Matching Module in the QUEST-model

Summary:

This paper documents a new Search & Matching extension of the basic version of QUEST, the European Commission Dynamic General Equilibrium model used for policy and historical business cycle analysis. The new module is suited for tracking labour market variables such as flows in and out of employment, vacancy rate and job separation rate. It hence is hoped to be useful for deepening the understanding of the processes driving the labour market dynamics including the role of crucial parameters such as the relative bargaining power of workers, replacement rate and the average cost of filling a vacancy. The paper provides a description of the extension, discusses its properties and potential uses and compares the results obtained with the extended version to those from the basic QUEST.

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