A Theory of Non-Coasean Labor Markets

Andres Blanco, Andres Drenik (), Christian Moser and Emilio Zaratiegui ()
Additional contact information
Andres Drenik: https://liberalarts.utexas.edu/economics/faculty/apd2246
Emilio Zaratiegui: https://econ.columbia.edu/econpeople/emilio-zaratiegui/

No 66, Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis

Abstract: We develop a theory of labor markets in a monetary economy with four realistic features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. Due to the non-Coasean nature of labor contracts, inefficient job separations occur in the form of endogenous quits and layoffs that are unilaterally initiated whenever a worker’s wage-to-productivity ratio moves outside an inaction region. We derive sufficient statistics for the aggregate labor market response to a monetary shock based on the distribution of workers’ wage-to-productivity ratios. These statistics crucially depend on the incidence of inefficient job separations, which we show how to identify using readily available microdata on wage changes and worker flows between jobs.

Keywords: Continuous-time methods; Wage rigidity; Wage inequality; Monetary policy; Layoffs; Quits; Inefficient job separations; Variational inequalities; Commitment; Unemployment; Stopping times; Directed search; Inflation (search for similar items in EconPapers)
JEL-codes: D31 E12 E31 (search for similar items in EconPapers)
Date: 2023-03-10
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.minneapolisfed.org/institute/working-papers-institute/iwp66.pdf (application/pdf)

Related works:
Working Paper: A Theory of Non-Coasean Labor Markets (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedmoi:95878

DOI: 10.21034/iwp.66

Access Statistics for this paper

More papers in Opportunity and Inclusive Growth Institute Working Papers from Federal Reserve Bank of Minneapolis Contact information at EDIRC.
Bibliographic data for series maintained by Kate Hansel ().