Endogenous Market Structures and Labor Market Dynamics (New version)

Andrea Colciago and Lorenza Rossi

No 155, Quaderni di Dipartimento from University of Pavia, Department of Economics and Quantitative Methods

Abstract: We propose a model characterized by strategic interactions among an endogenous number of producers and search and matching frictions in the labor market. In line with U.S. data: (i) new firms account for a relatively small share of overall employment, but they create a relevant fraction of new jobs; (ii) firms’ entry is procyclical; (iii) price mark ups are countercyclical, while aggregate profits are procyclical. In response to a technology shock the labor share decreases on impact and overshoots its long run level. Also the propagation on labor market variables is stronger than in the standard search model. We argue that the countercyclicality of the price mark up is the key mechanism for our results.

Keywords: Endogenous Market Structures; Job Creation; Firms’ Entry; Search and Matching Frictions. (search for similar items in EconPapers)
JEL-codes: E24 E32 L11 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2011-11
New Economics Papers: this item is included in nep-com, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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