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Directed Search and Job Rotation

  • Fei Li


    (Department of Economics, University of Pennsylvania)

  • Can Tian


    (Department of Economics, University of Pennsylvania)

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We consider the impact of job rotation in a directed search model in which firm sizes are endogenously determined and match quality is initially unknown. A large firm benefits from the opportunity of rotating workers so as to partially overcome loss of mismatch. As a result, in the unique symmetric equilibrium, large firms have higher labor productivity and lower separation rates. In contrast to the standard directed search model with multi-vacancy firms, this model can generate a positive correlation between firm size and wage without introducing any ex ante productivity differences or imposing any non-concave production function assumption.

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Paper provided by Penn Institute for Economic Research, Department of Economics, University of Pennsylvania in its series PIER Working Paper Archive with number 12-024.

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Length: 21 pages
Date of creation: 03 Jun 2012
Date of revision:
Handle: RePEc:pen:papers:12-024
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  1. Philipp Kircher & Leo Kaas, 2013. "Efficient firm dynamics in a frictional labor market," 2013 Meeting Papers 160, Society for Economic Dynamics.
  2. Theodore Papageorgiou, 2010. "Large Firms and Internal Labor Markets," 2010 Meeting Papers 1216, Society for Economic Dynamics.
  3. Steven J. Davis & R. Jason Faberman & John C. Haltiwanger, 2010. "The Establishment-Level Behavior of Vacancies and Hiring," NBER Working Papers 16265, National Bureau of Economic Research, Inc.
  4. Serene Tan, 2012. "Directed Search And Firm Size," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 95-113, 02.
  5. Jaime Ortega, 2001. "Job Rotation as a Learning Mechanism," Management Science, INFORMS, vol. 47(10), pages 1361-1370, October.
  6. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  7. Michael Peters, 1998. "Limits of Exact Equilibria for Capacity Constrained Sellers with costlySearch," Working Papers peters-98-01, University of Toronto, Department of Economics.
  8. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
  9. Lester, Benjamin, 2010. "Directed search with multi-vacancy firms," Journal of Economic Theory, Elsevier, vol. 145(6), pages 2108-2132, November.
  10. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  11. William B. Hawkins, 2013. "Competitive Search, Efficiency, And Multiworker Firms," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(1), pages 219-251, 02.
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