A Theory of Non-Coasean Labor Markets

Andrés Blanco (), Andres Drenik (), Christian Moser and Emilio Zaratiegui ()
Additional contact information
Andrés Blanco: University of Michigan
Andres Drenik: University of Texas at Austin
Emilio Zaratiegui: Columbia University

No 16121, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We develop a theory of labor markets in a monetary economy with four realistic features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. Due to the non-Coasean nature of labor contracts, 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 aggregate labor market response to a monetary shock 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: inflation; monetary policy; wage rigidity; wage inequality; unemployment; inefficient job separations; quits; layoffs; directed search; commitment; stopping times; continuous-time methods; variational inequalities (search for similar items in EconPapers)
JEL-codes: D31 E12 E31 (search for similar items in EconPapers)
Pages: 128 pages
Date: 2023-05
New Economics Papers: this item is included in nep-dge
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://docs.iza.org/dp16121.pdf (application/pdf)

Related works:
Working Paper: A Theory of Non-Coasean Labor Markets (2023)
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:iza:izadps:dp16121

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().