NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Worker replacement

Guido Menzio, Espen R. Moen

NBER Working Paper No. 15983
Issued in May 2010
NBER Program(s):   EFG

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.

download in pdf format
   (431 K)

email paper

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w15983

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

Users who downloaded this paper also downloaded these:
Oyer and Schaefer w15977 Personnel Economics: Hiring and Incentives
Klein, Moser, and Urban w15985 The Contribution of Trade to Wage Inequality: The Role of Skill, Gender, and Nationality
 
Publications
Activities
Meetings
NBER Videos
Themes
Data
People
About

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us