FIRM DYNAMICS WITH FRICTIONAL PRODUCT AND LABOR MARKETS

Leo Kaas and Bihemo Kimasa

International Economic Review, 2021, vol. 62, issue 3, 1281-1317

Abstract: We analyze the joint dynamics of prices, productivity, and employment across firms, building a dynamic equilibrium model of heterogeneous firms who compete for workers and customers in frictional labor and product markets. Using panel data on prices and output for German manufacturing firms, the model is calibrated to evaluate the quantitative contributions of productivity and demand for the labor market. Product market frictions decisively dampen the firms' employment adjustments to productivity shocks. We further analyze the impact of aggregate shocks to the first and second moments of productivity and demand and relate them to business‐cycle features in our data.

Date: 2021
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Citations: View citations in EconPapers (7)

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https://doi.org/10.1111/iere.12510

Related works:
Working Paper: Firm Dynamics with Frictional Product and Labor Markets (2018)
Working Paper: Firm dynamics with frictional product and labor markets (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:iecrev:v:62:y:2021:i:3:p:1281-1317

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