Coordination Frictions and Job Heterogeneity: A Discrete Time Analysis

John Kennes and Daniel le Maire

Economics Working Papers from Department of Economics and Business Economics, Aarhus University

Abstract: This paper develops and extends a dynamic, discrete time, job to worker matching model in which jobs are heterogeneous in equilibrium. The key assumptions of this economic environment are (i) matching is directed and (ii) coordination frictions lead to heterogeneous local labor markets. We de- rive a number of new theoretical results, which are essential for the empirical application of this type of model to matched employer-employee microdata. First, we o¤er a robust equilibrium concept in which there is a continu- ous dispersion of job productivities and wages. Second, we show that our model can be readily solved with continuous exogenous worker heterogene- ity, where high type workers (high outside options and productivity) earn higher wages in high type jobs and are hired at least as frequently to the better job types as low type workers (low outside options and productivity). Third, we demonstrate that the tractability of this framework is enhanced by analyzing and proving the equivalence of "seller auctions" and "buyer posting". We also prove a related result concerning the equivalence of buyer posting and seller posting when buyers di¤er continuously. Finally, we show that all of these results preserve the essential tractability of the baseline model with aggregate shocks. Therefore, we o¤er a parsimonious, general equilibrium framework in which to study the process by which the contin- uous dispersion of wages and productivities varies over the business cycle for a large population of workers with continuous dispersion of unobserved worker types.

Keywords: Wage dispersion; Productivity dispersion; Directed search (search for similar items in EconPapers)
JEL-codes: J63 J64 (search for similar items in EconPapers)
Pages: 38
Date: 2010-04-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://repec.econ.au.dk/repec/afn/wp/10/wp10_05.pdf (application/pdf)

Related works:
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:aah:aarhec:2010-05

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business Economics, Aarhus University
Bibliographic data for series maintained by ().