Worker replacement

Guido Menzio and Espen Moen ()

No 15983, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Consider a labor market in which firms want to insure existing employees against income fluctuations and, simultaneously, want to recruit new employees to fill vacant jobs. Firms can commit to a wage policy, i.e. a policy that specifies the wage paid to their employees as a function of tenure, productivity and other observables. However, firms cannot commit to employ workers. In this environment, the optimal wage policy prescribes not only a rigid wage for senior workers, but also a downward rigid wage for new hires. The downward rigidity in the hiring wage magnifies the response of unemployment to negative shocks.

JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2010-05
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published as Menzio, Guido & Moen, Espen R., 2010. "Worker replacement," Journal of Monetary Economics, Elsevier, vol. 57(6), pages 623-636, September.

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Related works:
Journal Article: Worker replacement (2010)
Working Paper: Worker Replacement (2008)
Working Paper: Worker Replacement (2008)
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