NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Niklas Engbom

Department of Economics
Stern School of Business
New York University
44 West Fourth Street
New York, NY 10012

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: New York University

NBER Working Papers and Publications

December 2019Firm and Worker Dynamics in a Frictional Labor Market
with Adrien G. Bilal, Simon Mongey, Giovanni L. Violante: w26547
This paper develops a random-matching model of a frictional labor market with firm and worker dynamics. Multi-worker firms choose whether to shrink or expand their employment in response to shocks to their decreasing returns to scale technology. Growing entails posting costly vacancies, which are filled either by the unemployed or by employees poached from other firms. Firms also choose when to enter and exit the market. Tractability is obtained by proving that, under a parsimonious set of assumptions, all workers’ and firm decisions are characterized by their joint marginal surplus, which in turn only depends on the firm’s productivity and size. As frictions vanish, the model converges to a standard competitive model of firm dynamics which allows a quantification of the misallocation cost...
 
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