EconPapers    
Economics at your fingertips  
 

Stochastic Search Equilibrium

Giuseppe Moscarini and Fabien Postel-Vinay

The Review of Economic Studies, 2013, vol. 80, issue 4, 1545-1581

Abstract: We study equilibrium wage and employment dynamics in a class of popular search models with wage posting, in the presence of aggregate productivity shocks. Firms offer and commit to (Markov) contracts, which specify a wage contingent on all payoff-relevant states, but must pay equally all of their workers, who have limited commitment and are free to quit at any time. We find sufficient conditions for the existence and uniqueness of a stochastic search equilibrium in such contracts, which is Rank Preserving [RP]: larger and more productive firms offer more generous contracts to their workers in all states of the world. On the RP equilibrium path, turnover is always efficient as workers always move from less to more productive firms. The resulting stochastic dynamics of firm size provide an intuitive explanation for the empirical finding that large employers have more cyclical job creation ( Moscarini and Postel-Vinay, 2012 ). Finally, computation of RP equilibrium contracts is tractable. Copyright 2013, Oxford University Press.

Date: 2013
References: Add references at CitEc
Citations: View citations in EconPapers (92)

Downloads: (external link)
http://hdl.handle.net/10.1093/restud/rdt012 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Stochastic Search Equilibrium (2013) Downloads
Working Paper: Stochastic Search Equilibrium (2013) Downloads
Working Paper: Stochastic Search Equilibrium (2013)
Working Paper: Stochastic Search Equilibrium (2010) Downloads
Working Paper: Stochastic Search Equilibrium (2010) Downloads
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:oup:restud:v:80:y:2013:i:4:p:1545-1581

Access Statistics for this article

The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

More articles in The Review of Economic Studies from Review of Economic Studies Ltd
Bibliographic data for series maintained by Oxford University Press ().

 
Page updated 2024-12-26
Handle: RePEc:oup:restud:v:80:y:2013:i:4:p:1545-1581