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Changing Worker fs States and Inefficient Decisions on Turnover


  • Keisuke Kawata

    () (Graduate School of Economics, Osaka University)


This paper considers an on-the-job search model that includes wage bargaining and employer-employee mismatch. There are two states of workers in relationship to their fit for a particular job, good match versus bad match (mismatch). These states change in accordance with a stochastic process. There are two main results; the first is that the turnover level that workers find optimal is lower than the socially optimal level. The second is that the level of the firm fs entry is not optimal even though the Hosios condition is hold. The first result is clearly distinct from previous studies.

Suggested Citation

  • Keisuke Kawata, 2009. "Changing Worker fs States and Inefficient Decisions on Turnover," Discussion Papers in Economics and Business 09-37, Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP).
  • Handle: RePEc:osk:wpaper:0937

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    on-the-job search; wage bargaining; mismatch; turnover;

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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