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The Macrodynamics of Sorting between Workers and Firms

Lise, J; Robin, J-M; (2017) The Macrodynamics of Sorting between Workers and Firms. American Economic Review , 107 (4) pp. 1104-1135. 10.1257/aer.20131118. Green open access

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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.

Type: Article
Title: The Macrodynamics of Sorting between Workers and Firms
Open access status: An open access version is available from UCL Discovery
DOI: 10.1257/aer.20131118
Publisher version: http://dx.doi.org/10.1257/aer.20131118
Language: English
Additional information: © 2017 American Economic Association. All rights reserved. This version is the version of record. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Social Sciences, Economics, Business & Economics, Frictional Labor-Market, Equilibrium Unemployment, Wage Distributions, Cyclical Behavior, Directed Search, Job Search, Vacancies, Dynamics, Heterogeneity, Fluctuations
UCL classification: UCL
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1561896
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