A Theory of Labor Markets with Inefficient Turnover

Andrés Blanco, Andrés Drenik, Christian Moser and Emilio Zaratiegui
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Andrés Blanco: Federeal Reserve Bank of Atlanta and Emory University
Andrés Drenik: University of Texas at Austin
Emilio Zaratiegui: Columbia University

No 313, Working Papers from Red Nacional de Investigadores en Economía (RedNIE)

Abstract: We develop a theory of labor markets with four features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. Inefficient job separations occur in the form of endogenous quits and layoffs that are unilaterally initiated whenever a worker’s wage-to-productivity ratio moves outside an inaction region. We derive sufficient statistics for the labor market response to aggregate shocks based on the distribution of workers’ wage-to-productivity ratios. These statistics crucially depend on the incidence of inefficient job separations, which we show how to identify using readily available microdata on wage changes and worker flows between jobs.

Keywords: Wage Rigidity; Directed Search; Limited Commitment; Job Separations; Quits; Layoffs; Inflation (search for similar items in EconPapers)
JEL-codes: E31 E52 J64 (search for similar items in EconPapers)
Pages: 77 pages
Date: 2024-03
New Economics Papers: this item is included in nep-dge and nep-lab
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https://rednie.eco.unc.edu.ar/files/DT/313.pdf (application/pdf)

Related works:
Working Paper: A Theory of Labor Markets with Inefficient Turnover (2024)
Working Paper: A Theory of Labor Markets with Inefficient Turnover (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:aoz:wpaper:313

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