Competitive on-the-job search

Pietro Garibaldi, Espen Moen () and Dag Einar Sommervoll

No 10175, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The paper proposes a model of on-the-job search and industry dynamics in which search is directed. Firms permanently differ in productivity levels, their production function features constant returns to scale, and search costs are convex in search intensity. Wages are determined in a competitive manner, as firms advertise wage contracts (expected discounted incomes) so as to balance wage costs and search costs (queue length). An important assumption is that a firm is able to sort out its coordination problems with their employees in such a way that the on-the-job search behavior of workers maximizes the match surplus. Our model has several novel features. First, it is close in spirit to the competitive model, with a tractable and unique equilibrium, and is therefore useful for empirical testing. Second, the resulting equilibrium gives rise to an efficient allocation of resources. Third, the equilibrium is characterized by a job ladder, where unemployed workers apply to low productivity firms offering low wages, and then gradually move on to more productive, higher-paying firms. Finally, the equilibrium offers different implications for the dynamics of job-to-job transitions than existing models of random search.

Keywords: Directed search; Competitive search equilibrium; Firm dynamics; Efficiency (search for similar items in EconPapers)
JEL-codes: C62 J60 (search for similar items in EconPapers)
Date: 2014-09
New Economics Papers: this item is included in nep-dge and nep-lab
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Related works:
Journal Article: Competitive On-the-job Search (2016)
Working Paper: Competitive on-the-job search (2010)
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