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Deriving the Beveridge Curve: Correcting the Diamand and Mortensen-Pissarides Search and Matching Theory

This paper disentangles the complicated relation between wage, unemployment and vacancy. It proves that job creation is nothing but labor demand, and job destruction is nothing but labor supply. The application of the central limit theorem helps derive the Beveridge curve. This paper disproves Diamond’s search and Mortensen and Pissarides’ matching models.