Workers' Job Prospects and Young Firm Dynamics

Seula Kim ()
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Seula Kim: Pennsylvania State University

No 17655, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper investigates how worker beliefs and job prospects impact the wages and growth of young firms, as well as the aggregate economy. Building a heterogeneous-firm directed search model where workers gradually learn about firm types, I find that learning generates endogenous wage differentials for young firms. High-performing young firms must pay higher wages than equally high-performing old firms, while low-performing young firms offer lower wages than equally low-performing old firms. Reduced uncertainty or labor market frictions lower the wage differentials, thereby enhancing young firm dynamics and aggregate productivity. The results are consistent with U.S. administrative employee-employer matched data.

Keywords: Wage Differentials; Firm Dynamics; Learning; Search Frictions; Uncertainty (search for similar items in EconPapers)
JEL-codes: E20 E24 J31 J41 J64 L25 L26 M13 M52 M55 (search for similar items in EconPapers)
Date: 2025-01
New Economics Papers: this item is included in nep-dge, nep-ent, nep-hrm, nep-lab and nep-sbm
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