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A Theory of Labor Markets with Inefficient Turnover

Author

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  • Andrés Blanco
  • Andres Drenik
  • Christian Moser
  • Emilio Zaratiegui

Abstract

We develop a theory of labor markets with four features: search frictions, worker productivity shocks, wage rigidity, and two-sided lack of commitment. Inefficient job separations occur in the form of endogenous quits and layoffs that are unilaterally initiated whenever a worker's wage-to-productivity ratio moves outside an inaction region. We derive sufficient statistics for the labor market response to aggregate shocks based on the distribution of workers' wage-to-productivity ratios. These statistics depend on the incidence of inefficient job separations and are linked to readily available microdata on wage changes and worker flows between jobs.

Suggested Citation

  • Andrés Blanco & Andres Drenik & Christian Moser & Emilio Zaratiegui, 2024. "A Theory of Labor Markets with Inefficient Turnover," NBER Working Papers 32409, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32409
    Note: EFG LS ME
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    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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