A Theory of Labor Markets with Inefficient Turnover

Andrés Blanco, Andres Drenik, Christian Moser and Emilio Zaratiegui

No 32409, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a theory of labor markets with four features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. 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 labor market response to aggregate shocks based on the distribution of workers' wage-to-productivity ratios. These statistics depend on the incidence of inefficient job separations and are linked to readily available microdata on wage changes and worker flows between jobs.

JEL-codes: E31 E52 J64 (search for similar items in EconPapers)
Date: 2024-05
New Economics Papers: this item is included in nep-dge and nep-lab
Note: EFG LS ME
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Related works:
Working Paper: A Theory of Labor Markets with Inefficient Turnover (2024)
Working Paper: A Theory of Labor Markets with Inefficient Turnover (2023)
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