The macrodynamics of sorting between workers and firms

Jeremy Lise, Jean Marc Robin

Research output: Contribution to journalArticlepeer-review

26 Scopus citations

Abstract

We develop an equilibrium model of on-the-job search with ex ante heterogeneous workers and firms, aggregate uncertainty, and vacancy creation. The model produces rich dynamics in which the distributions of unemployed workers, vacancies, and worker-firm matches evolve stochastically over time. We prove that the surplus function, which fully characterizes the match value and the mobility decision of workers, does not depend on these distributions. This result means the model is tractable and can be estimated. We illustrate the quantitative implications of the model by fitting to US aggregate labor market data from 1951-2012. The model has rich implications for the cyclical dynamics of the distribution of skills of the unemployed, the distribution of types of vacancies posted, and sorting between heterogeneous workers and firms.

Original languageEnglish (US)
Pages (from-to)1104-1135
Number of pages32
JournalAmerican Economic Review
Volume107
Issue number4
DOIs
StatePublished - Apr 2017

Bibliographical note

Funding Information:
We gratefully acknowledges financial support from European Research Council (ERC) grant ERC-2010-AdG-269693-WASP.

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