Competitive On-the-job Search

Pietro Garibaldi, Espen Moen () and Dag-Einar Sommervoll
Additional contact information
Dag-Einar Sommervoll: Norwegian University of Life Sciences

Review of Economic Dynamics, 2016, vol. 19, 88-107

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). Firms are assumed to sort out their 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, on-the-job search is an efficient response to firm heterogeneities and convex search costs. Third, the equilibrium leans towards 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. With a continuum of firm types, the job ladder is strict, in the sense that there is a one-to-one correspondence between the productivity of the current employer and that of the firms she searches for. The paper also contributes methodologically, as the existence proof requires a version of Schauder's fixed point theorem that is not commonly used by economists. Finally, our model offers different implications for the dynamics of job-to-job transitions than existing models of random search. (Copyright: Elsevier)

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: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://dx.doi.org/10.1016/j.red.2015.10.001
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See http://www.sciencedirect.com/ for details.

Related works:
Working Paper: Competitive on-the-job search (2014)
Working Paper: Competitive on-the-job search (2010)
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:red:issued:15-20

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2015.10.001

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().