Cross Sectional Efficiency and Labor Hoarding in an Matching Model of Unemployment

Giuseppe Bertola and Ricardo Caballero ()

No 4472, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study positive and normative aspects of steady-state equilibrium in a market where firms of endogenous size experience idiosyncratic shocks and undergo a costly search process to hire their workers. The stylized model we propose highlights interactions between job-security provisions and sectoral shocks in determining the natural rate of unemployment, the allocation of labor, and the extent of labor hoarding, and rationalizes cross-sectional asymmetries of gross employment flows at the firm level. In our model, where productivity and search costs are dynamically heterogeneous across firms, decentralized wage bargains imply important cross-sectional inefficiencies, which overshadow the static search inefficiencies on which simpler models focus.

JEL-codes: E24 J63 (search for similar items in EconPapers)
Date: 1993-09
Note: EFG
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Citations: View citations in EconPapers (3)

Published as Review of Economic Studies, vol 61, no 3, pp 435-456, July 1994

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Journal Article: Cross-Sectional Efficiency and Labour Hoarding in a Matching Model of Unemployment (1994)
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