Workers’ Job Prospects and Young Firm Dynamics

Seula Kim

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper investigates how worker beliefs and job prospects impact the wages and growth of young firms, as well as the aggregate economy. Building a heterogeneous-firm directed search model where workers gradually learn about firm types, I find that learning generates endogenous wage differentials for young firms. High-performing young firms must pay higher wages than equally high-performing old firms, while low-performing young firms offer lower wages than equally low-performing old firms. Reduced uncertainty or labor market frictions lower the wage differentials, thereby enhancing young firm dynamics and aggregate productivity. The results are consistent with U.S. administrative employee-employer matched data.

Keywords: wage differentials; firm dynamics; learning; search frictions; uncertainty (search for similar items in EconPapers)
JEL-codes: E20 E24 J31 J41 J64 L25 L26 M13 M52 M55 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-dge, nep-ent and nep-lab
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https://www2.census.gov/library/working-papers/2025/adrm/ces/CES-WP-25-09.pdf First version, 2025 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:25-09

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