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  • Hawkins, William B.

    ()
    (Department of Economics, Yeshiva University)

  • Acemoglu, Daron

    ()
    (Department of Economics, Massachusetts Institute of Technology)

Abstract

We present a generalization of the standard random-search model of unemployment in which firms hire multiple workers and in which the hiring process is time-consuming as well as costly. We follow Stole and Zwiebel (1996a,b) and assume that wages are determined by continuous bargaining between the firm and its employees. The model generates a non-trivial dispersion of firm sizes; when firms' production technologies exhibit decreasing returns to labor, it also generates wage dispersion, even when all firms and all workers are ex ante identical. We characterize the steady-state equilibrium and show that, with a suitably chosen distribution of ex ante heterogeneity across firms, it is consistent with several important stylized facts about the joint distribution of firm size, firm growth, and wages in the U.S. economy. We also conduct a numerical investigation of the out-of-steady state dynamics of our model. We find that the responses of unemployment and of the vacancy to unemployment ratio to a shock to labor productivity can be somewhat more persistent than in the Mortensen-Pissarides benchmark where each firm employs a single worker.

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Bibliographic Info

Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): (Forthcoming)
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Handle: RePEc:the:publsh:1061

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Related research

Keywords: Bargaining; labor market dynamics; persistence; search; wages;

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References

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  1. Van Reenen, John, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U.K. Companies," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 195-226, February.
  2. Andrew B. Bernard & Jonathan Eaton & J. Bradford Jensen & Samuel Kortum, 2000. "Plants and Productivity in International Trade," Boston University - Institute for Economic Development 105, Boston University, Institute for Economic Development.
  3. Andrew Atkeson & Patrick J. Kehoe, 2005. "Modeling and Measuring Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1026-1053, October.
  4. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  5. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
  6. Fujita, Shigeru & Ramey, Garey, 2007. "Job matching and propagation," Journal of Economic Dynamics and Control, Elsevier, vol. 31(11), pages 3671-3698, November.
  7. Fabien Postel-Vinay & Giuseppe Moscarini, 2013. "Stochastic Search Equilibrium," 2013 Meeting Papers 159, Society for Economic Dynamics.
  8. L. A. N. Amaral & S. V. Buldyrev & S. Havlin & H. Leschhorn & P. Maass & M. A. Salinger & H. E. Stanley & M. H. R. Stanley, 1997. "Scaling behavior in economics: I. Empirical results for company growth," Papers cond-mat/9702082, arXiv.org.
  9. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Munich Reprints in Economics 20471, University of Munich, Department of Economics.
  10. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  11. Monique Ebell & Christian Haefke, 2008. "Product Market Deregulation and the U.S. Employment Miracle," CEP Discussion Papers dp0874, Centre for Economic Performance, LSE.
  12. William B. Hawkins, 2013. "Competitive Search, Efficiency, And Multiworker Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 219-251, 02.
  13. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  14. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
  15. Fabien Postel-Vinay & Giuseppe Moscarini, 2008. "The Timing of Labor Market Expansions: New Facts and a New Hypothesis," 2008 Meeting Papers 326, Society for Economic Dynamics.
  16. Elhanan Helpman & Oleg Itshoki & Stephen Redding, 2009. "Inequality and unemployment in a global economy," LSE Research Online Documents on Economics 25501, London School of Economics and Political Science, LSE Library.
  17. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  18. William B. Hawkins, 2011. "Bargaining with Commitment between Workers and Large Firms," 2011 Meeting Papers 308, Society for Economic Dynamics.
  19. Shigeru Fujita & Makoto Nakajima, 2013. "Worker flows and job flows: a quantitative investigation," Working Papers 13-09, Federal Reserve Bank of Philadelphia.
  20. Xavier Gabaix, 2009. "Power Laws in Economics and Finance," Annual Review of Economics, Annual Reviews, vol. 1(1), pages 255-294, 05.
  21. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  22. Roberto M. Samaniego & Alain Delacroix, 2010. "Joint Determination of Product and Labor Market Policies in a Model of Rent Creation and Division," 2010 Meeting Papers 1105, Society for Economic Dynamics.
  23. Marcus Hagedorn & Iourii Manovskii, 2011. "Productivity And The Labor Market: Comovement Over The Business Cycle," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 603-619, 08.
  24. Felbermayr, Gabriel & Prat, Julien, 2011. "Product market regulation, Firm Selection, and Unemployment," Munich Reprints in Economics 20593, University of Munich, Department of Economics.
  25. Esteban Rossi-Hansberg & Mark L. J. Wright, 2006. "Establishment size dynamics in the aggregate economy," Staff Report 382, Federal Reserve Bank of Minneapolis.
  26. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1103-1144, 08.
  27. Belzil, Christian, 2000. "Job Creation and Job Destruction, Worker Reallocation, and Wages," Journal of Labor Economics, University of Chicago Press, vol. 18(2), pages 183-203, April.
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Citations

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Cited by:
  1. Edouard Schaal, 2011. "Uncertainty, Productivity and Unemployment in the Great Depression," 2011 Meeting Papers 1450, Society for Economic Dynamics.
  2. William Hawkins, . "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
  3. Jiwoon Kim, 2013. "Bargaining with Existing Workers, Over-hiring of Firms, and Labor Market Fluctuations," 2013 Meeting Papers 721, Society for Economic Dynamics.
  4. Jósef Sigurdsson, 2013. "Capital Investment and Equilibrium Unemployment," Economics wp61, Department of Economics, Central bank of Iceland.

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