Worker replacement

Guido Menzio and Espen Moen ()

Journal of Monetary Economics, 2010, vol. 57, issue 6, 623-636

Abstract: Consider a labor market in which firms want to insure existing employees against income fluctuations and, simultaneously, want to recruit new employees to fill vacant jobs. Firms can commit to a wage policy, i.e. a policy that specifies the wage paid to their employees as a function of tenure, productivity and other observables. However, firms cannot commit to employ workers. In this environment, the optimal wage policy prescribes not only a rigid wage for senior workers, but also a downward rigid wage for new hires. The downward rigidity in the hiring wage magnifies the response of unemployment to negative shocks.

Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304-3932(10)00061-9
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Worker replacement (2010)
Working Paper: Worker Replacement (2008)
Working Paper: Worker Replacement (2008)
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:eee:moneco:v:57:y:2010:i:6:p:623-636

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().