Worker Matching and Firm Value
This paper studies the value of firms and their hiring and firing decisions in an environment where the productivity of the workers depends on how well they match with their co-workers and the firm acts as a coordinating device. Match quality derives from a production technology whereby workers are randomly located on the Salop circle, and depends negatively on the distance between the workers. It is shown that a worker's contribution in a given firm changes over time in a nontrivial way as co-workers are replaced with new workers. The paper derives optimal hiring and replacement policies, including an optimal stopping rule, and characterizes the resulting equilibrium in terms of employment, wages and distribution of firm values. The paper stresses the role of horizontal differences in worker productivity, as opposed to vertical, assortative matching issues. Simulations of the model show the dynamics of worker replacement policy, the resulting firm value and age distributions, and the connections between them.
|Date of creation:||Jun 2012|
|Date of revision:|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert Shimer, 2001.
"The Assignment of Workers to Jobs In an Economy with Coordination Frictions,"
NBER Working Papers
8501, National Bureau of Economic Research, Inc.
- Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
- Barton H. Hamilton & Jack A. Nickerson & Hideo Owan, 2003. "Team Incentives and Worker Heterogeneity: An Empirical Analysis of the Impact of Teams on Productivity and Participation," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 465-497, June.
- Philipp Kircher & Jan Eeckhout, 2009.
"Identifying Sorting, In Theory,"
2009 Meeting Papers
581, Society for Economic Dynamics.
- Jan Eeckhout & Philipp Kircher, 2009. "Identifying Sorting - In Theory," PIER Working Paper Archive 09-007, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
- Eeckhout, Jan & Kircher, Philipp, 2009. "Identifying Sorting: In Theory," IZA Discussion Papers 4004, Institute for the Study of Labor (IZA).
- Jan Eeckhout & Philipp Kircher, 2011. "Identifying sorting: in theory," LSE Research Online Documents on Economics 29708, London School of Economics and Political Science, LSE Library.
- Prescott, Edward C & Visscher, Michael, 1980. "Organization Capital," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 446-61, June.
- Eric D. Gould & Eyal Winter, 2009.
"Interactions between Workers and the Technology of Production: Evidence from Professional Baseball,"
The Review of Economics and Statistics,
MIT Press, vol. 91(1), pages 188-200, February.
- Gould, Eric D & Winter, Eyal, 2007. "Interactions Between Workers and the Technology of Production: Evidence from Professional Baseball," CEPR Discussion Papers 6527, C.E.P.R. Discussion Papers.
- Gould, Eric D. & Winter, Eyal, 2007. "Interactions Between Workers and the Technology of Production: Evidence from Professional Baseball," IZA Discussion Papers 3096, Institute for the Study of Labor (IZA).
- Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
- John Haltiwanger & Ron S. Jarmin & Javier Miranda, 2010.
"Who Creates Jobs? Small vs. Large vs. Young,"
10-17, Center for Economic Studies, U.S. Census Bureau.
- Jovanovic, Boyan, 1979.
"Job Matching and the Theory of Turnover,"
Journal of Political Economy,
University of Chicago Press, vol. 87(5), pages 972-90, October.
- Jan Eeckhout & Philipp Kircher, 2008.
"Sorting and Decentralized Price Competition,"
PIER Working Paper Archive
08-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp6657. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Mark Fallak)
If references are entirely missing, you can add them using this form.