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Workers' Job Prospects and Young Firm Dynamics

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  • Kim, Seula

    (Pennsylvania State University)

Abstract

This paper investigates how worker beliefs and job prospects impact the wages and growth of young firms, as well as the aggregate economy. Building a heterogeneous-firm directed search model where workers gradually learn about firm types, I find that learning generates endogenous wage differentials for young firms. High-performing young firms must pay higher wages than equally high-performing old firms, while low-performing young firms offer lower wages than equally low-performing old firms. Reduced uncertainty or labor market frictions lower the wage differentials, thereby enhancing young firm dynamics and aggregate productivity. The results are consistent with U.S. administrative employee-employer matched data.

Suggested Citation

  • Kim, Seula, 2025. "Workers' Job Prospects and Young Firm Dynamics," IZA Discussion Papers 17655, IZA Network @ LISER.
    • Handle: RePEc:iza:izadps:dp17655
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    References listed on IDEAS

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