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Directed search and job rotation

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  • Li, Fei
  • Tian, Can
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    Abstract

    In this note, we consider the impact of job rotation in a directed search model in which firm sizes are endogenously determined, and match quality is initially unknown. A large firm benefits from the opportunity of rotating workers so as to partially overcome mismatch loss. As a result, in the unique symmetric subgame perfect equilibrium, large firms have higher labor productivity and lower separation rate. In contrast to the standard directed search model with multi-vacancy firms, this model can generate a positive correlation between firm size and wage without introducing any exogenous productivity shock or imposing non-concave production function assumption.

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    File URL: http://mpra.ub.uni-muenchen.de/33875/
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    Bibliographic Info

    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 33875.

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    Date of creation: 04 Oct 2011
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    Handle: RePEc:pra:mprapa:33875

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    Related research

    Keywords: Directed Search; Job Rotation; Firm Size and Wage; Firm Size and Labor Productivity;

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    1. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
    2. Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 163-79, February.
    3. Meyer, M.A., 1991. "The Dynamics of Learning with Team Production: Implications for Task Assignment," Papers 30, Stanford - Institute for Thoretical Economics.
    4. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
    5. Charles Brown & James L. Medoff, 1989. "The Employer Size-Wage Effect," NBER Working Papers 2870, National Bureau of Economic Research, Inc.
    6. Theodore Papageorgiou, 2010. "Large Firms and Internal Labor Markets," 2010 Meeting Papers 1216, Society for Economic Dynamics.
    7. Philipp Kircher & Leo Kaas, 2013. "Efficient firm dynamics in a frictional labor market," 2013 Meeting Papers 160, Society for Economic Dynamics.
    8. 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.
    9. Shouyong Shi, 2002. "Product Market and the Size-Wage Differential," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 21-54, February.
    10. 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.
    11. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
    12. Jaime Ortega, 2001. "Job Rotation as a Learning Mechanism," Management Science, INFORMS, vol. 47(10), pages 1361-1370, October.
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