Labor market dynamics with sorting. (English) Zbl 07865857
Summary: I study a dynamic search-matching model with two-sided heterogeneity, a production complementarity that induces labor market sorting, and aggregate shocks. In response to a positive productivity shock, incentives to sort increase disproportionately. Firms respond by posting additional vacancies, and the strength of the response is increasing in firm productivity. The distribution of unemployment worker types adjusts slowly, which amplifies job creation in the short run. In the long run, falling unemployment curtails the firms’ vacancy posting. The model closely matches time-series moments from U.S. labor market data and produces realistic degrees of wage dispersion and labor market sorting.
MSC:
| 91-XX | Game theory, economics, finance, and other social and behavioral sciences |
Keywords:
search; matching; sorting; mismatch; aggregate shocks; worker heterogeneity; firm heterogeneity; unemployment dynamicsSoftware:
DynareReferences:
| [1] | Adjemian, Stéphane; Bastani, Houtan; Juillard, Michel; Karamé, Fréderic; Mihoubi, Ferhat; Mutschler, Willi; Pfeifer, Johannes; Ratto, Marco; Rion, Normann; Villemot, Sébastien, Dynare: Reference Manual Version 5 (2022), CEPREMAP, Dynare Working Papers 72 |
| [2] | Bagger, Jesper; Lentz, Rasmus, An empirical model of wage dispersion with sorting. Rev. Econ. Stud., 153-190 (2019) · Zbl 1409.91160 |
| [3] | Bagger, Jesper; Sørensen, Kenneth L.; Vejlin, Rune, Wage sorting trends. Econ. Lett., 63-67 (2013) |
| [4] | Baley, Isaac; Figueiredo, Ana; Ulbricht, Robert, Mismatch cycles. J. Polit. Econ., 2943-2984 (2022) |
| [5] | Becker, Gary S., A theory of marriage: part I. J. Polit. Econ., 813-846 (1973) |
| [6] | Bonhomme, Stéphane; Lamadon, Thibaut; Manresa, Elena, A distributional framework for matched employer employee data. Econometrica, 699-739 (2019) · Zbl 1422.91416 |
| [7] | Boppart, Timo; Krusell, Per; Mitman, Kurt, Exploiting MIT shocks in heterogeneous-agent economies: the impulse response as a numerical derivative. J. Econ. Dyn. Control, 68-92 (2018), Fed St. Louis-JEDC-SCG-SNB-UniBern Conference, titled: “Fiscal and Monetary Policies” · Zbl 1401.91457 |
| [8] | Bulow, Jeremy I.; Geanakoplos, John D.; Klemperer, Paul D., Multimarket oligopoly: strategic substitutes and complements. J. Polit. Econ., 488-511 (1985) |
| [9] | Card, David; Heining, Jörg; Kline, Patrick, Workplace heterogeneity and the rise of West German wage inequality. Q. J. Econ., 967-1015 (2013) · Zbl 1400.91278 |
| [10] | Diamond, Peter A., Wage determination and efficiency in search equilibrium. Rev. Econ. Stud., 217-227 (1982) |
| [11] | Freund, Lukas, 2022. Superstar teams: the micro origins and macro implications of coworker complementarities. Unpublished. |
| [12] | Gautier, Pieter A.; Teulings, Coen N., Sorting and the output loss due to search frictions. J. Eur. Econ. Assoc., 1136-1166 (2015) |
| [13] | Gautier, Pieter A.; Teulings, Coen N.; Van Vuuren, Aico, On-the-job search, mismatch and efficiency. Rev. Econ. Stud., 245-272 (2010) · Zbl 1197.91130 |
| [14] | Hagedorn, Marcus; Law, Tzuo Hann; Manovskii, Iourii, Identifying equilibrium models of labor market sorting. Econometrica, 29-65 (2017) · Zbl 1420.91191 |
| [15] | Hagedorn, Marcus; Manovskii, Iourii, The cyclical behavior of equilibrium unemployment and vacancies revisited. Am. Econ. Rev., 1692-1706 (2008) |
| [16] | Hall, Robert E., Employment fluctuations with equilibrium wage stickiness. Am. Econ. Rev., 50-65 (2005) |
| [17] | Hall, Robert E.; Milgrom, Paul R., The limited influence of unemployment on the wage bargain. Am. Econ. Rev., 1653-1674 (2008) |
| [18] | Herkenhoff, Kyle; Lise, Jeremy; Menzio, Guido; Phillips, Gordon M., Production and Learning in Teams (2018), National Bureau of Economic Research, Working Paper 25179 |
| [19] | Hodrick, Robert J.; Prescott, Edward C., Postwar U.S. business cycles: an empirical investigation. J. Money Credit Bank., 1-16 (1997) |
| [20] | Hornstein, Andreas; Krusell, Per; Violante, Giovanni, Unemployment and vacancy fluctuations in the matching model: inspecting the mechanism. Econ. Q.- Fed. Reserve Bank Richmond, 19-51 (2005) |
| [21] | Hornstein, Andreas; Krusell, Per; Violante, Giovanni L., Frictional wage dispersion in search models: a quantitative assessment. Am. Econ. Rev., 2873-2898 (2011) |
| [22] | Hosios, Arthur J., On the efficiency of matching and related models of search and unemployment. Rev. Econ. Stud., 279-298 (1990) · Zbl 0691.90010 |
| [23] | Lise, Jeremy; Meghir, Costas; Robin, Jean-Marc, Matching, sorting and wages. Rev. Econ. Dyn., 63-87 (2016) |
| [24] | Lise, Jeremy; Robin, Jean-Marc, The macrodynamics of sorting between workers and firms. Am. Econ. Rev., 1104-1135 (2017) |
| [25] | Lochner, Benjamin; Schulz, Bastian, Firm productivity, wages, and sorting. J. Labor Econ. (2022), Forthcoming |
| [26] | Marimon, Ramon; Zilibotti, Fabrizio, Unemployment vs. mismatch of talents: reconsidering unemployment benefits. Econ. J., 266-291 (1999) |
| [27] | Mortensen, Dale T., The matching process as a noncooperative bargaining game, 233-258 |
| [28] | Mueller, Andreas I., Separations, sorting, and cyclical unemployment. Am. Econ. Rev., 2081-2107 (2017) |
| [29] | Mukoyama, Toshihiko, Heterogeneous jobs and the aggregate labour market. Jpn. Econ. Rev., 30-50 (2019) |
| [30] | Nöldeke, Georg, Tröger, Thomas, 2009. Matching heterogeneous agents with a linear search technology. Unpublished. |
| [31] | Petrongolo, Barbara; Pissarides, Christopher A., Looking into the black box: a survey of the matching function. J. Econ. Lit., 390-431 (2001) |
| [32] | Petrosky-Nadeau, Nicolas; Zhang, Lu, Solving the DMP model accurately. Quant. Econ., 611-650 (2017) · Zbl 1396.91380 |
| [33] | Pissarides, Christopher A., Short-run equilibrium dynamics of unemployment, vacancies, and real wages. Am. Econ. Rev., 676-690 (1985) |
| [34] | Pissarides, Christopher A., Equilibrium Unemployment Theory (2000), MIT Press |
| [35] | Pissarides, Christopher A., The unemployment volatility puzzle: is wage stickiness the answer?. Econometrica, 1339-1369 (2009) · Zbl 1178.91089 |
| [36] | Postel-Vinay, Fabien; Robin, Jean-Marc, Equilibrium wage dispersion with worker and employer heterogeneity. Econometrica, 2295-2350 (2002) · Zbl 1137.91522 |
| [37] | Pries, Michael J., Worker heterogeneity and labor market volatility in matching models. Rev. Econ. Dyn., 664-678 (2008) |
| [38] | Reiter, Michael, Solving heterogeneous-agent models by projection and perturbation. J. Econ. Dyn. Control, 649-665 (2009) · Zbl 1167.93031 |
| [39] | Robin, Jean-Marc, On the dynamics of unemployment and wage distributions. Econometrica, 1327-1355 (2011) · Zbl 1258.91123 |
| [40] | Shimer, Robert, The cyclical behavior of equilibrium unemployment and vacancies. Am. Econ. Rev., 25-49 (2005) |
| [41] | Shimer, Robert; Smith, Lones, Assortative matching and search. Econometrica, 343-369 (2000) · Zbl 1020.91045 |
| [42] | Shimer, Robert, Wu, Liangjie, 2021. Diffusion on a sorted network. Unpublished. |
| [43] | Teulings, Coen N.; Gautier, Pieter A., The right man for the job. Rev. Econ. Stud., 553-580 (2004) · Zbl 1063.90027 |
This reference list is based on information provided by the publisher or from digital mathematics libraries. Its items are heuristically matched to zbMATH identifiers and may contain data conversion errors. In some cases that data have been complemented/enhanced by data from zbMATH Open. This attempts to reflect the references listed in the original paper as accurately as possible without claiming completeness or a perfect matching.
