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The Macrodynamics of Sorting between Workers and Firms

Author

Listed:
  • Jeremy Lise

    (UCL - University College of London [London])

  • Jean-Marc Robin

    (ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique, Economics department - MIT - Massachusetts Institute of Technology)

Abstract
We develop an equilibrium model of on-the-job search with ex ante heterogeneous workers and firms, aggregate uncertainty, and vacancy creation. The model produces rich dynamics in which the distributions of unemployed workers, vacancies, and worker-firm matches evolve stochastically over time. We prove that the surplus function, which fully characterizes the match value and the mobility decision of workers, does not depend on these distributions. This result means the model is tractable and can be estimated. We illustrate the quantitative implications of the model by fitting to US aggregate labor market data from 1951-2012. The model has rich implications for the cyclical dynamics of the distribution of skills of the unemployed, the distribution of types of vacancies posted, and sorting between heterogeneous workers and firms.

Suggested Citation

  • Jeremy Lise & Jean-Marc Robin, 2017. "The Macrodynamics of Sorting between Workers and Firms," SciencePo Working papers Main hal-03391971, HAL.
    • Handle: RePEc:hal:spmain:hal-03391971
    DOI: 10.1257/aer.20131118
    Note: View the original document on HAL open archive server: https://sciencespo.hal.science/hal-03391971v1
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    References listed on IDEAS

    as
    1. Fabien Postel-Vinay & Hélène Turon, 2010. "On-The-Job Search, Productivity Shocks, And The Individual Earnings Process," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 51(3), pages 599-629, August.
    2. Giuseppe Moscarini & Fabien Postel-Vinay, 2013. "Stochastic Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 80(4), pages 1545-1581.
    3. Melvyn G. Coles & Dale T. Mortensen, 2016. "Equilibrium Labor Turnover, Firm Growth, and Unemployment," Econometrica, Econometric Society, vol. 84, pages 347-363, January.
    4. Jeremy Lise & Jean-Marc Robin, 2017. "The Macrodynamics of Sorting between Workers and Firms," American Economic Review, American Economic Association, vol. 107(4), pages 1104-1135, April.
    5. Shouyong Shi, 2009. "Directed Search for Equilibrium Wage-Tenure Contracts," Econometrica, Econometric Society, vol. 77(2), pages 561-584, March.
    6. Leo Kaas & Philipp Kircher, 2015. "Efficient Firm Dynamics in a Frictional Labor Market," American Economic Review, American Economic Association, vol. 105(10), pages 3030-3060, October.
    7. Giuseppe Moscarini & Fabien Postel-Vinay, 2010. "Unemployment and Small Cap Returns: The Nexus," American Economic Review, American Economic Association, vol. 100(2), pages 333-337, May.
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    11. Menzio, Guido & Shi, Shouyong, 2010. "Block recursive equilibria for stochastic models of search on the job," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1453-1494, July.
    12. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
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    14. Gregory Jolivet & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "The Empirical Content of the Job Search Model: Labor Mobility and Wage Distributions in Europe and the U.S.$," Contributions to Economic Analysis, in: Structural Models of Wage and Employment Dynamics, pages 269-308, Emerald Group Publishing Limited.
    15. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
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    17. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, vol. 70(6), pages 2295-2350, November.
    18. Guido Menzio & Shouyong Shi, 2011. "Efficient Search on the Job and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 119(3), pages 468-510.
    19. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
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    27. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Post-Print hal-03458567, HAL.
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    More about this item

    Keywords

    job search; equilibrium model; macrodynamics;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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