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The quality effect of intrafirm bargaining with endogenous worker flows

Author

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  • Tristan-Pierre Maury

    (EDHEC Economics Research Centre - EDHEC - EDHEC Business School - UCL - Université catholique de Lille)

  • Fabien Tripier

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes)

Abstract

This paper proposes a new explanation of the job quality issue in search and matching models, which is not based on market externalities but on strategic interactions within firms through the intrafirm bargaining process. We develop a matching and intrafirm bargaining model in which large firms hire workers on a frictional labour market and decide to destroy low productivity job-worker matches. The coexistence of entry and exit flows of workers in a large firm gives rise to a specific interaction between the firing decision and the intrafirm bargaining process on wages, which causes inefficient decisions to be made on hiring and firing. The sources of inefficiency in this economy are (i) the well-known quantitative effect of intrafirm bargaining, namely the excessive size of the firms concerned, and (ii) a new quality effect, namely the poor quality of the job-worker matches selected by firms.

Suggested Citation

  • Tristan-Pierre Maury & Fabien Tripier, 2011. "The quality effect of intrafirm bargaining with endogenous worker flows," Working Papers hal-00566168, HAL.
    • Handle: RePEc:hal:wpaper:hal-00566168
    Note: View the original document on HAL open archive server: https://hal.science/hal-00566168v2
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    References listed on IDEAS

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    1. Garey Ramey & Wouter J. den Haan & Joel Watson, 2000. "Job Destruction and Propagation of Shocks," American Economic Review, American Economic Association, vol. 90(3), pages 482-498, June.
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    Cited by:

    1. William Hawkins, 2015. "Bargaining with Commitment Between Workers and Large Firms," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 350-364, April.

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    Keywords

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    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs

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