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Search with multi-worker firms

  • Hawkins, William B.


    (Department of Economics, Yeshiva University)

  • Acemoglu, Daron


    (Department of Economics, Massachusetts Institute of Technology)

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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Article provided by Econometric Society in its journal Theoretical Economics.

Volume (Year): 9 (2014)
Issue (Month): 3 (September)

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Handle: RePEc:the:publsh:1061
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  8. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Journal of Economic Theory, Elsevier, vol. 146(1), pages 39-73, January.
  9. Xavier Gabaix, 2008. "Power Laws in Economics and Finance," NBER Working Papers 14299, National Bureau of Economic Research, Inc.
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  11. 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.
  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. William Hawkins, 2014. "Online Appendix to "Bargaining with Commitment Between Workers and Large Firms"," Technical Appendices 12-114, Review of Economic Dynamics.
  14. Giuseppe Moscarini & Fabien Postel-Vinay, 2010. "Stochastic Search Equilibrium," Levine's Working Paper Archive 661465000000000001, David K. Levine.
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  17. 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.
  18. Shigeru Fugita & Garey Ramey, 2006. "Job matching and propagation," Working Papers 06-13, Federal Reserve Bank of Philadelphia.
  19. Shigeru Fujita & Makoto Nakajima, 2013. "Worker flows and job flows: a quantitative investigation," Working Papers 13-09, Federal Reserve Bank of Philadelphia.
  20. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
  21. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 19 pages.
  22. 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.
  23. William B. Hawkins, 2011. "Bargaining with Commitment between Workers and Large Firms," 2011 Meeting Papers 308, Society for Economic Dynamics.
  24. 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,
  25. Erzo G. J. Luttmer, 2007. "Selection, Growth, and the Size Distribution of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 122(3), pages 1103-1144.
  26. 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.
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