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Temporary Replacement Workers in a Matching Model with Employment at Will

Author

Listed:
  • Garibaldi, Pietro

    (Collegio Carlo Alberto)

  • Gomes, Pedro Maia

    (Birkbeck, University of London)

Abstract

In the US almost 3 per cent of employees are absent from their job for reasons other than vacation, but are still technically employed. We argue that firms may find optimal to use temporary replacement workers to fill these vacant positions. We set up a matching model with directed search and double-sided heterogeneity. When a workers is temporarily forced out of the labour market, firms can freely destroy the job, put it in "mothball", or look for a temporary worker to "keep the seat warm". When the latter option is optimal, a market for temporary replacement workers emerges in equilibrium. In a quantitative application to the US labor market, replacement workers represent 2.7 per cent of total employment.

Suggested Citation

  • Garibaldi, Pietro & Gomes, Pedro Maia, 2022. "Temporary Replacement Workers in a Matching Model with Employment at Will," IZA Discussion Papers 15503, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp15503
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
    • J40 - Labor and Demographic Economics - - Particular Labor Markets - - - General
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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