Modeling and Simulating Labor Market Dynamics.

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The research is concerned with quantitative analysis of employment adjustment. Theoretical analysis focused on the consequences of heterogeneity of the jobs offered and workers seeking the jobs. The labor market is modeled as stochastic matching processes among these heterogenous job slots and workers. We find that in general the Nash equilibrium yields socially inefficient outcomes; the precise way in which the inefficiency arise depends delicately upon the nature of heterogeneity. The theoretical model is applied for the analysis of the labor market dynamics in Japan. The simulation model is driven by a AR(1) process in capital productivity representing the business cycle. The model also explicitly takes account of differences in labor productivity and exogenous separation rate across age and sex. The model successfully captures cross sectional and intertemporal stylited facts about labor market dynamics in Japan.