IDEAS home Printed from https://ideas.repec.org/p/aoz/wpaper/313.html

A Theory of Labor Markets with Inefficient Turnover

Author

Listed:
  • Andrés Blanco

    (Federeal Reserve Bank of Atlanta and Emory University)

  • Andrés Drenik

    (University of Texas at Austin)

  • Christian Moser

    (Columbia University, CEPR, and IZA)

  • Emilio Zaratiegui

    (Columbia University)

Abstract

We develop a theory of labor markets with four features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. Inefficient job separations occur in the form of endogenous quits and layoffs that are unilaterally initiated whenever a worker’s wage-to-productivity ratio moves outside an inaction region. We derive sufficient statistics for the labor market response to aggregate shocks based on the distribution of workers’ wage-to-productivity ratios. These statistics crucially depend on the incidence of inefficient job separations, which we show how to identify using readily available microdata on wage changes and worker flows between jobs.

Suggested Citation

  • Andrés Blanco & Andrés Drenik & Christian Moser & Emilio Zaratiegui, 2024. "A Theory of Labor Markets with Inefficient Turnover," Working Papers 313, Red Nacional de Investigadores en Economía (RedNIE).
    • Handle: RePEc:aoz:wpaper:313
    as

    Download full text from publisher

    File URL: https://rednie.eco.unc.edu.ar/files/DT/313.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Massimo Marinacci & Luigi Montrucchio, 2019. "Unique Tarski Fixed Points," Management Science, INFORMS, vol. 44(4), pages 1174-1191, November.
    2. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    3. Mark Gertler & Antonella Trigari, 2009. "Unemployment Fluctuations with Staggered Nash Wage Bargaining," Journal of Political Economy, University of Chicago Press, vol. 117(1), pages 38-86, February.
    4. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    5. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    6. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
    7. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chan, See-Yu & Hobler, Stephan & Van Rens, Thijs, 2025. "Why did we think wages are rigid for all those years?," The Warwick Economics Research Paper Series (TWERPS) 1577, University of Warwick, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Antonella Trigari, 2006. "The Role of Search Frictions and Bargaining for Inflation Dynamics," Working Papers 304, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    2. Chugh, Sanjay K., 2013. "Costly external finance and labor market dynamics," Journal of Economic Dynamics and Control, Elsevier, vol. 37(12), pages 2882-2912.
    3. Masanori Kashiwagi, 2018. "The Welfare Consequences Of A Quantitative Search And Matching Approach To The Labor Market," Bulletin of Economic Research, Wiley Blackwell, vol. 70(4), pages 423-442, October.
    4. Sergio A. Lago Alves, 2018. "Monetary Policy, Trend Inflation, and Unemployment Volatility," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 50(4), pages 637-673, June.
    5. Sergio A. Lago Alves, 2012. "Trend Inflation and the Unemployment Volatility Puzzle," Working Papers Series 277, Central Bank of Brazil, Research Department.
    6. Hauser, Daniela & Seneca, Martin, 2022. "Labor mobility in a monetary union," Journal of International Economics, Elsevier, vol. 137(C).
    7. Bodenstein, Martin & Zhao, Junzhu, 2020. "Employment, wages and optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 112(C), pages 77-96.
    8. Raissi, M., 2011. "A Linear Quadratic Approach to Optimal Monetary Policy with Unemployment and Sticky Prices: The Case of a Distorted Steady State," Cambridge Working Papers in Economics 1146, Faculty of Economics, University of Cambridge.
    9. Gregory De Walque & Olivier Pierrard & Henri Sneessens & Raf Wouters, 2009. "Sequential Bargaining in a Neo-Keynesian Model with Frictional Unemployment and Staggered Wage Negotiations," Annals of Economics and Statistics, GENES, issue 95-96, pages 223-250.
    10. Tang, Jenn-Hong, 2010. "Optimal monetary policy in a new Keynesian model with job search," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 330-353, March.
    11. Monacelli, Tommaso & Quadrini, Vincenzo & Trigari, Antonella, 2023. "Financial markets and unemployment," Journal of Financial Economics, Elsevier, vol. 147(3), pages 596-626.
    12. Raissi, Mehdi, 2015. "Flexible inflation targeting and labor market inefficiencies," Economic Modelling, Elsevier, vol. 46(C), pages 283-300.
    13. Rogerson, Richard & Shimer, Robert, 2011. "Search in Macroeconomic Models of the Labor Market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 7, pages Pages: 61, Elsevier.
    14. Idriss Fontaine, 2021. "Uncertainty and Labour Force Participation," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(2), pages 437-471, April.
    15. Bielecki, Marcin, . "Długie oddziaływanie szoków finansowych z perspektywy wzrostu endogenicznego," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2022(3).
    16. Antonella Trigari, 2009. "Equilibrium Unemployment, Job Flows, and Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(1), pages 1-33, February.
    17. Moen, Espen R. & Rosén, Åsa, 2006. "Incentives in Competitive Search Equilibrium and Wage Rigidity," CEPR Discussion Papers 5554, C.E.P.R. Discussion Papers.
    18. Kim, Cholwoo, 2025. "Deviations from the LOP with labor and goods market frictions," The Warwick Economics Research Paper Series (TWERPS) 1540, University of Warwick, Department of Economics.
    19. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
    20. Roger E. A. Farmer, 2005. "Shooting the Auctioneer," 2005 Meeting Papers 26, Society for Economic Dynamics.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aoz:wpaper:313. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Laura Inés D Amato (email available below). General contact details of provider: https://edirc.repec.org/data/redniar.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.