American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
The Macrodynamics of Sorting between Workers and Firms
American Economic Review
vol. 107,
no. 4, April 2017
(pp. 1104–35)
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.Citation
Lise, Jeremy, and Jean-Marc Robin. 2017. "The Macrodynamics of Sorting between Workers and Firms." American Economic Review, 107 (4): 1104–35. DOI: 10.1257/aer.20131118Additional Materials
JEL Classification
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
- E32 Business Fluctuations; Cycles
- J24 Human Capital; Skills; Occupational Choice; Labor Productivity
- J63 Labor Turnover; Vacancies; Layoffs
- J64 Unemployment: Models, Duration, Incidence, and Job Search