Heterogeneous Workers, Optimal Job Seeking, and Aggregate Labor Market Dynamics

Abstract

In the United States, the aggregate vacancy-unemployment (V/U) ratio is strongly procyclical, and a large fraction of its adjustment associated with changes in productivity is sluggish. The latter is entirely unexplained by the benchmark homogeneous-agent model of equilibrium unemployment theory. I show that endogenous search and workerside horizontal heterogeneity in production capacity can be important in accounting for this propagation puzzle. Driven by di¤erences in unemployed and on-the-job seekers'search incentives, the probability that any given …rm with a job opening matches with a worker endowed with a comparative advantage in that job exhibits a stage of procyclical slow-moving adjustment. Consequently, so do the expected gains from posting vacancies and, hence, the V/U ratio. The model has channels through which the majority of both the V/U ratio's sluggish-adjustment properties and its elasticity with respect to output per worker can be accounted for.

Employment and Firm Heterogeneity, Capital Allocation, and Countercyclical Labor Market Policies

“…Calibrated parameters are summarized in Table 8. = 0:33 10 For the salaried separation rate in large …rms we take into account that a small share of workers in these …rms is informal using existing evidence on the share of labor informality by …rm size.…”

“…for …rms of size [6][7][8][9][10], and log T F P LSF T F P log T F P LF T F P = 0:746 ) T F P LSF T F P LF = 0:4743; log T F P LI T F P log T F P LF T F P = 0:395 ) T F P LI T F P LF = 0:6737; log T F P SLSF T F P log T F P LF T F P = 0:092 ) T F P SLSF T F P LF = 0:9121; log T F P II T F P log T F P LF T F P = 0:701 ) T F P II T F P LF = 0:4961;…”

Offshoring, Mismatch, and Labor Market Outcomes

“…The existence of such sectoral meeting functions imply that workers are indeed able to only search for jobs that they are quali…ed for and are actually willing to take. See Epstein (2012)…”

Selective Hiring and Welfare Analysis in Labor Market Models

“…More recently, Chugh and Merkl (2016) and Epstein (2016) analyze how heterogeneity a¤ects labor market dynamics. The conceptual framework in Chugh and Merkl, which models heterogeneity as shocks to match quality, is similar to the model we use in this paper, whereas Epstein models heterogeneity as workers having comparative advantages in particular jobs.…”

“…Because of this di¤erence in focus, we emphasize the importance of selective versus random hiring, whereas the heterogeneity in both Epstein (2016) and Chugh and Merkl (2016) gives rise to what we would call random hiring.…”