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Matching Workers

Author

Listed:
  • Espen R. Moen

    (Økonomisk institutt Universitetet i Oslo)

  • Eran Yashiv

    (Tel Aviv University
    Centre for Macroeconomics (CFM))

Abstract

This paper studies the matching of workers within the firm when the productivity of workers depends on how well they match with their co-workers. The firm acts as a coordinating device and derives value from this role. It is shown that a worker's contribution to firm value changes over time in a non-trivial way as co-workers are replaced by new workers. The paper derives optimal hiring and replacement policies, including an optimal stopping rule, and characterizes the resulting equilibrium in terms of worker flows, firm output and the distribution of firm values. Simulations of the model reveal a rich pattern of worker turnover dynamics and their connections to the resulting firm values distribution. The paper stresses the role of horizontal differences in worker productivity, which are different from vertical, assortative matching issues. It derives the rent from organizational capital, with worker complementarities playing a key role. We compare the model to match-specific productivity models and explore the essential differences, with the emphasis laid on worker interactions and complementarities.

Suggested Citation

  • Espen R. Moen & Eran Yashiv, 2016. "Matching Workers," Discussion Papers 1615, Centre for Macroeconomics (CFM).
    • Handle: RePEc:cfm:wpaper:1616
    as

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    File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2016/CFMDP2016-16-Paper.pdf
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    References listed on IDEAS

    as
    1. Jan Eeckhout & Philipp Kircher, 2011. "Identifying Sorting--In Theory," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 78(3), pages 872-906.
    2. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 972-990, October.
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    4. Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-461, June.
    5. John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2013. "Who Creates Jobs? Small versus Large versus Young," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 347-361, May.
    6. Luis Garicano & Esteban Rossi-Hansberg, 2006. "Organization and Inequality in a Knowledge Economy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1383-1435.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Worker interactions; Firm value; Complementarity; Worker value; Organizational capital; Salop circle; Hiring; Firing; Match Quality; Optimal Stopping.;
    All these keywords.

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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