Replacement hiring and the productivity-wage gap
Sushant Acharya () and
Shu Lin Wee
Additional contact information
Shu Lin Wee: Carnegie Mellon University
No 860, Staff Reports from Federal Reserve Bank of New York
A large and growing share of hires in the United States are replacement hires. This increase coincides with a growing productivity-wage gap. We connect these trends by building a model where firms post long-lived vacancies and engage in on-the-job search for more productive workers. These features improve a firm's bargaining position while raising workers' job insecurity and the wedge between hiring and meeting rates. All three channels lower wages while raising productivity. Quantitatively, increased replacement hiring explains half the increase in the productivity-wage gap. The socially efficient outcome features fewer low-productivity jobs and a 10 percent narrower productivity-wage gap.
Keywords: replacement hiring; productivity-wage gap; unemployment; labor share; efficiency (search for similar items in EconPapers)
JEL-codes: E32 J63 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
https://www.newyorkfed.org/research/staff_reports/sr860.html Summary (text/html)
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr860.pdf Full text (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:fip:fednsr:860
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in Staff Reports from Federal Reserve Bank of New York Contact information at EDIRC.
Bibliographic data for series maintained by Amy Farber ().