The new macroeconomics emphasizes distributions and flows rather than static points and intersections. Because market frictions make the search for trading partners time-consuming and costly, market participants continually transition between economic states, and trades occur at dispersed prices. These frictions generate incentives for ongoing search and for bargaining between potential trading partners.
This volume advances the empirical study of frictional markets by drawing on the unique merged Danish registers that combine firm accounting data, individual employee records, and international trade information. Using these rich data, it estimates key flow rates, dispersions, and relationships among central variables such as productivity, firm size, wages, exports, growth, and unemployment. The findings deepen our understanding of how markets function, support the interpretation of dispersion and flows as equilibrium outcomes, and offer new insights into economic cycles, adjustment dynamics, and policy design.
This volume is dedicated to the memory of
Dale T. Mortensen
. It acknowledges his pioneering contributions to the analysis of markets with search frictions and to the use of matched employer-employee data.
The new macroeconomics is about distributions and flows, rather than points and intersections. Market frictions imply that the search for trading partners is time consuming and costly. Consequently, market participants flow between economic states, and trades occur at dispersed prices. This generates motives for continued search for better market opportunities, and for bargaining between potential trading partners. This volume takes the empirical analysis of markets with frictions to a new level by using unique merged registers from Denmark on firm accounting data, individual employee data, and international trade data to estimate empirically the relevant flow rates, dispersions, and relations among key variables of interest, including productivity, firm size, wages, exports, growth, and unemployment. The results serve to inform researchers and policy makers about the functioning of markets, justify the interpretation of dispersion and flows as equilibrium outcomes, and provide an understanding of cycles, adjustment, and potentials for public policy.
