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Show how a fall in the matching efficiency technology can affect output (or employment), wages, the unemployment and vacancy rates. How could economists differentiate
Show how a fall in the matching efficiency technology can affect output (or employment), wages, the unemployment and vacancy rates. How could economists differentiate this from a fall in labor productivity if they could view the four above pieces of data over many years? [In other words, how would the outcomes from these two shocks produce different patterns in the data for at least one of these observations?] [Hint: Some of the data would produce patterns in the data that are similar but at least one of the out- comes of the model would look different under the two hypotheses. If possible, document your answer through the two equations that characterize the equilibrium. Remember your answer should mention directly the system of equations that lead to the solution of the model or the pair of graphs which repre- sent them. Also remember that we solved from the firm's side of the problem first.]
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