Essays on dynamics of the labor market

This dissertation studies the labor market dynamics over the business cycle and in the long-run by using a search and matching model.;The first essay studies the effect of long-run productivity growth on unemployment, focusing on worker flows into and out of unemployment. I find empirical evidence that in the long-run, the productivity growth rate is positively correlated with the job finding rate and is negatively correlated with the separation rate in the US. In order to explain these empirical findings, I incorporate on the-job-search and sunk costs of job creation into an endogenous job separation model with disembodied technological progress. The incorporation of on-the-job search and sunk costs allows faster growth to reduce unemployment by decreasing job separation and inducing job creation. Quantitative analysis demonstrates that the incorporation of these two factors improves the ability of the matching model to fit the data.;The second essay studies the cyclical behavior of a search and matching model with capital investment. The search and matching model has recently been criticized for its inability to explain the key business cycle properties of the U.S. labor market. I develop an endogenous job separation matching model in which a firm's decision for irreversible capital investment is endogenously determined. I investigate the amplification of productivity shocks in the labor market through capital investment. The calibrated model demonstrates that the incorporation of irreversible capital investment improves the ability of the standard matching model to generate cyclical fluctuations of unemployment and vacancies in response to productivity shocks of reasonable magnitude.;The last essay studies the effect of technological progress on unemployment in the short and long-run. This essay finds empirical evidence that productivity growth and unemployment are correlated positively in the short-run and correlated negatively in the long-run. I develop a vintage search and matching model in which technological progress affects the productivity of an existing job through technological diffusion. In the model, faster productivity growth increases unemployment in the short-run due to creative destruction, and it reduces unemployment through technological diffusion in the long-run.