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This paper studies the cyclical behavior of job separation and the characteristics of matches between workers and jobs. We estimate a proportional hazard model with competing risks, distinguishing between different types of separations. A higher unemployment rate at the start of an employment relationship increases the probability of job-to-job transitions, whereas its effect on employment-to-unemployment transitions is negative. We then build a simple job-ladder model to interpret our empirical results. A model with two-dimensional heterogeneity in match (job) characteristics has the same qualitative features as the data. Once the model is calibrated to include cyclicality in the offered match characteristics, it can also fit the quantitative features of the data. The model reveals matches formed in booms provide more nonwage utility to the workers but are subject to a higher future probability of separation shocks.

This paper incorporates worker selection into a random matching model with multi-worker firms. Unlike the standard Diamond-Mortensen-Pissarides (DMP) model, the extended model is compatible with cross-sectional behavior of vacancy yields, which rise with employment growth and worker turnover, but fall with establishment size. Using calibrated versions of the standard and worker selection models, I show that accounting for these patterns has quantitatively important policy implications. I also compare the worker selection and the directed search models. While both models account for these patterns equally well, they differ with regard to labor market policy. (JEL E24, J23, J63, J64)

This paper studies the cyclical behavior of employment duration using data from the National Longitudinal Survey of Youth 1979 cohort. We estimate a proportional hazard model under the assumption that job terminations due to different reasons are competing risks. A higher unemployment rate at the start of an employment relationship increases the probability that the worker quits to take or look for another job, but it decreases the probability the firm fires the worker. The net effect of these opposing forces on the overall duration of the employment is negative, but small, implying that match quality is weakly pro-cyclical. We also build a simple job-ladder model to interpret our empirical results.