Equilibrium Labor Turnover, Firm Growth and Unemployment PDF Download
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Author: Melvyn G. Coles
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 34
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Book Description
This paper considers a dynamic, non-steady state environment in which wage dispersion exists and evolves in response to shocks. Workers do not observe firm productivity and firms do not commit to future wages, but there is on-the-job search for higher paying jobs. The model allows for firm turnover (new start-up firms are created, some existing firms die) and firm specific productivity shocks. In a separating equilibrium, more productive firms signal their type by paying strictly higher wages in every state of the market. Consequently, workers always quit to firms paying a higher wage and so move efficiently from less to more productive firms. As a further implication of the cost structure assumed, endogenous firm size growth is consistent with Gibrat's law. The paper provides a complete characterization and establishes existence and uniqueness of the separating (non-steady state) equilibrium in the limiting case of equally productive firms. The existence of equilibrium with any finite number of firm types is also established. Finally, the model provides a coherent explanation of Danish manufacturing data on firm wage and labor productivity dispersion as well as the cross firm relationship between them -- National Bureau of Economic Research web site.
Author: Melvyn G. Coles
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 34
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Book Description
This paper considers a dynamic, non-steady state environment in which wage dispersion exists and evolves in response to shocks. Workers do not observe firm productivity and firms do not commit to future wages, but there is on-the-job search for higher paying jobs. The model allows for firm turnover (new start-up firms are created, some existing firms die) and firm specific productivity shocks. In a separating equilibrium, more productive firms signal their type by paying strictly higher wages in every state of the market. Consequently, workers always quit to firms paying a higher wage and so move efficiently from less to more productive firms. As a further implication of the cost structure assumed, endogenous firm size growth is consistent with Gibrat's law. The paper provides a complete characterization and establishes existence and uniqueness of the separating (non-steady state) equilibrium in the limiting case of equally productive firms. The existence of equilibrium with any finite number of firm types is also established. Finally, the model provides a coherent explanation of Danish manufacturing data on firm wage and labor productivity dispersion as well as the cross firm relationship between them -- National Bureau of Economic Research web site.
Author: Carlos Carrillo-Tudela
Publisher:
ISBN:
Category : Business cycles
Languages : en
Pages : 64
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Book Description
This paper develops and estimates a fully microfounded equilibrium business cycle model of the US labor market with aggregate productivity shocks. Those microfoundations are consistent with evidence regarding the underlying distribution of firm growth rates across firms [by age and size] and, when aggregated, are consistent with macro-evidence regarding gross job creation and job destruction flows over the cycle. By additionally incorporating on-the-job search, we systematically characterise the stochastic relationships between aggregate job creation and job destruction flows across firms, gross hire and quit flows [churning] by workers across firms, as well as the persistence and volatility of unemployment and worker job finding rates over the cycle.
Author: Christopher A. Pissarides
Publisher: MIT Press
ISBN: 9780262264068
Category : Business & Economics
Languages : en
Pages : 278
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Book Description
This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this approach for macroeconomic equilibrium and for the efficiency of the labor market. An equilibrium theory of unemployment assumes that firms and workers maximize their payoffs under rational expectations and that wages are determined to exploit the private gains from trade. This book focuses on the modeling of the transitions in and out of unemployment, given the stochastic processes that break up jobs and lead to the formation of new jobs, and on the implications of this approach for macroeconomic equilibrium and for the efficiency of the labor market. This approach to labor market equilibrium and unemployment has been successful in explaining the determinants of the "natural" rate of unemployment and new data on job and worker flows, in modeling the labor market in equilibrium business cycle and growth models, and in analyzing welfare policy. The second edition contains two new chapters, one on endogenous job destruction and one on search on the job and job-to-job quitting. The rest of the book has been extensively rewritten and, in several cases, simplified.
Author: M. Fuat Sener
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
This paper constructs a general equilibrium model of equilibrium unemployment by combining an endogenous growth model with a variant of equilibrium search theory. The analysis offers two explanations for the causes of widening wage gap between skilled and less-skilled labor, and rising unemployment rate among the less skilled: technological change in the form of an increase in the size of innovations or skilled labor saving technological change in R&D activity. In addition, the model identifies two distinct effects of faster technological progress on the aggregate unemployment rate. First, it increases the rate of labor turnover and therefore increases the aggregate unemployment rate - the creative destruction effect. Second, it creates R&D jobs, which offer workers complete job security, and consequently reduces the aggregate unemployment rate - the resource reallocation effect.
Author: Edmund S. Phelps
Publisher: Harvard University Press
ISBN: 9780674843738
Category : Business & Economics
Languages : en
Pages : 444
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Book Description
Dissatisfied with the explanations of the business cycle provided by the Keynesian, monetarist, New Keynesian, and real business cycle schools, Edmund Phelps has developed from various existing strands-some modern and some classical--a radically different theory to account for the long periods of unemployment that have dogged the economies of the United States and Western Europe since the early 1970s. Phelps sees secular shifts and long swings of the unemployment rate as structural in nature. That is, they are typically the result of movements in the natural rate of unemployment (to which the equilibrium path is always tending) rather than of long-persisting deviations around a natural rate itself impervious to changing structure. What has been lacking is a "structuralist" theory of how the natural rate is disturbed by real demand and supply shocks, foreign and domestic, and the adjustments they set in motion. To study the determination of the natural rate path, Phelps constructs three stylized general equilibrium models, each one built around a distinct kind of asset in which firms invest and which is important for the hiring decision. An element of these models is the modern economics of the labor market whereby firms, in seeking to dampen their employees' propensities to quit and shirk, drive wages above market-clearing levels-the phenomenon of the "incentive wage"--and so generate involuntary unemployment in labor-market equilibrium. Another element is the capital market, where interest rates are disturbed by demand and supply shocks such as shifts in profitability, thrift, productivity, and the rate of technical progress and population increase. A general-equilibrium analysis shows how various real shocks, operating through interest rates upon the demand for employees and through the propensity to quit and shirk upon the incentive wage, act upon the natural rate (and thus equilibrium path). In an econometric and historical section, the new theory of economic activity is submitted to certain empirical tests against global postwar data. In the final section the author draws from the theory some suggestions for government policy measures that would best serve to combat structural slumps.
Author: Gerard J. van den Berg
Publisher:
ISBN:
Category : Arbejdskraftens kvalifikationer
Languages : en
Pages : 54
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Book Description
Author: Donald A. Nichols
Publisher:
ISBN:
Category : Unemployed
Languages : en
Pages : 50
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Author: Hamid Firooz
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This dissertation develops and estimates an open economy dynamic general equilibrium model to introduce and quantify a new mechanism through which openness influences productivity. The model features matching frictions in the labor market and endogenous demand elasticities in product markets. Because openness affects demand elasticities, it influences productivitythrough several channels. First, higher demand elasticities make firms'employment decisions more responsive to their idiosyncratic productivityshocks. This causes aggregate job turnover to rise, and thereby tends toraise unemployment. Second, this same increase in job turnover meansthat workers are moved more frequently from less to more efficient firms.Finally, to the extent that openness reduces the cross-firm dispersion inmarkups, it likewise tends to reduce the distortionary wedges between firms'marginal revenue products.Counterfactual analysis quantifies these trade-induced impacts on job turnover, unemployment, and labor misallocation. I show that a 10 percentage point reduction in import tariffs combined with a 12 percent reduction in the iceberg trade cost raises jobturnover and unemployment (in steady state) by roughly 7 and 12 percent,respectively. These effects would be almost four times smaller ifdemand elasticities were not allowed to respond to openness.
Author: Robert H. Topel
Publisher:
ISBN:
Category : Economic analysis
Languages : en
Pages : 66
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Book Description
In labor market equilibrium, sectoral differences in natural rates of unemployment generate a conformable distribution of wage differentials that compensate workers for bearing unemployment risk. This paper offers new empirical evidence on the determinants of the equilibrium. The analysis consists of two stages. First, I estimate a three-state model of employment and unemployment that identifies the determinants of individuals' rates of entering and leaving employment spells. Sectoral and policy-induced differences in unemployment probabilities evolve naturally from this framework. Second, I estimate the impact of these differences on the distribution of wages. An important finding is the powerful impact of the unemployment insurance (UI) system both on unemployment and on equalizing wage differences. The evidence is strong that the availability of UI increases unemployment, while simultaneously reducing the magnitude of compenstaing wage differentials. Neglect of the role of UI as a substitute for wages partially accounts for the small compensating differentials estimated in previous research.
Author: Erwan Quintin
Publisher:
ISBN:
Category : Business enterprises
Languages : en
Pages : 0
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Book Description
"Labor market outcomes such as turnover and earnings are correlated with employer characteristics, even after controlling for observable differences in worker characteristics. We argue that this systematic relationship constitutes strong evidence in favor of models where workers choose how much to invest in future productivity. Because employer characteristics are correlated with firm survival, returns to these investments vary across firm types. We describe a dynamic general equilibrium model where workers employed in firms more likely to survive choose to devote more time to productivity enhancing activities, and therefore have a steeper earnings-tenure profile. Our model also predicts that quit rates should be lower in firms more likely to survive, and should tend to fall during slow times, while job destruction rates should rise. These predictions, we argue, are borne out by the existing empirical evidence"--Abstract.
