  We develop a dynamic decomposition of the empirical Beveridge curve, i.e.,
the level of vacancies conditional on unemployment. Using a standard model, we
show that three factors can shift the Beveridge curve: reduced-form matching
efficiency, changes in the job separation rate, and out-of-steady-state
dynamics. We find that the shift in the Beveridge curve during and after the
Great Recession was due to all three factors, and each factor taken separately
had a large effect. Comparing the pre-2010 period to the post-2010 period, a
fall in matching efficiency and out-of-steady-state dynamics both pushed the
curve upward, while the changes in the separation rate pushed the curve
downward. The net effect was the observed upward shift in vacancies given
unemployment. In previous recessions changes in matching efficiency were
relatively unimportant, while dynamics and the separation rate had more impact.
Thus, the unusual feature of the Great Recession was the deterioration in
matching efficiency, while separations and dynamics have played significant,
partially offsetting roles in most downturns. The importance of these latter
two margins contrasts with much of the literature, which abstracts from one or
both of them. We show that these factors affect the slope of the empirical
Beveridge curve, an important quantity in recent welfare analyses estimating
the natural rate of unemployment.
