Article ID Journal Published Year Pages File Type
957209 Journal of Economic Theory 2013 14 Pages PDF
Abstract

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 to rotate workers so as to partially overcome the 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 assumptions.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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