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A Model of Job and Worker Flows

  • Ricardo Lagos
  • Nobuhiro Kiyotaki

We develop a model of gross job and worker flows and use it to study how the wages and employment status of individual workers evolve over time and how they are affected by aggregate labor market conditions. We also examine the effects that labor market institutions and public policy have on the gross flows, as well as on the resulting wage distribution, employment and aggregate output in the equilibrium. The model we propose also rationalizes various other features of labor markets. For example, why do displaced workers tend to experience a significant and persistent fall in wages? Why do workers stay unemployed when on-the-job-search is at least as effective as off-the-job-search? Why is it that good jobs are not only better paid, but often also more stable? From a theoretical point of view, we study the extent to which the competitive equilibrium achieves an efficient allocation of resources

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Paper provided by Society for Economic Dynamics in its series 2004 Meeting Papers with number 36.

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Date of creation: 2004
Handle: RePEc:red:sed004:36
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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