Efficiency and Labor Market Dynamics in a Model of Labor Selection

Sanjay Chugh and Christian Merkl

No 846, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: We characterize efficient allocations and cyclical fluctuations in a labor selection model. Potential new hires are heterogenous in the cross-section in their degree of training costs. In a calibrated version of the model that identifies costly selection with micro-level data on training costs, efficient fluctuations feature highly volatile unemployment and hiring rates, in line with empirical evidence. We show analytically in a partial equilibrium version of the model that volatility arises from selection effects, rather than general equilibrium effects.

Keywords: labor market frictions; hiring costs; efficiency; amplification (search for similar items in EconPapers)
JEL-codes: E24 E32 J20 (search for similar items in EconPapers)
Date: 2013-04-09
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (17)

Forthcoming, International Economic Review

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Related works:
Working Paper: Efficiency and Labor Market Dynamics in a Model of Labor Selection (2015)
Working Paper: Efficiency and Labor Market Dynamics in a Model of Labor Selection (2015)
Working Paper: Efficiency and Labor Market Dynamics in a Model of Labor Selection (2011)
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