Labor specialization as a source of market frictions
LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library
This paper investigates why labor specialization brings additional frictions to the labor market. The intuition is that labor specialized firms rely on complementarity and firm-specific human capital, assigning high value to the worker-employer match. Consistent with employees' importance, the findings show that specialized firms preserve their workforce: these firms labor hoard and increase wages during slow-downs. Additionally, when specialized firms unexpectedly face a labor supply shock | albeit managing to decrease the wages of the remaining co-workers, they become less productive. Overall, the empirical evidence suggests that frictions introduce bilateral monopoly rents.
Keywords: labor specialization; market frictions; division of labor; human capital (search for similar items in EconPapers)
JEL-codes: J24 J42 J63 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec and nep-hrm
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:91703
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