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"Mortensen, Dale"
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Markets with Search Friction and the DMP Model
What are search frictions? What role do they play in the analysis of markets? Why are they important? This paper attempts to answer these questions. This paper also presents a short history of the development of the ideas and relate those developments to the current labor market conditions in Europe and the US. Expecting persistence in this process, workers and employers revise downward their expectations about the present surplus value of a future match, particularly that which was designed to produce those durables. Hence, the model predicts a sharp and large fall in the value of the right-hand side of the free entry condition represented in equation. Employers respond by creating fewer vacancies. As a result, the vacancy-unemployment ratio required by the equality of the left and right sides of the free entry condition falls. In geometric terms, the initial impact corresponds to a downward shift in the JC curve.
Journal Article
An Empirical Model of Growth through Product Innovation
Productivity differences across firms are large and persistent, but the evidence for worker reallocation as an important source of aggregate productivity growth is mixed. The purpose of this paper is to estimate the structure of an equilibrium model of growth through innovation designed to identify and quantify the role of resource reallocation in the growth process. The model is a version of the Schumpeterian theory of firm evolution and growth developed by Klette and Kortum (2004) extended to allow for firm heterogeneity. The data set is a panel of Danish firms that includes information on value added, employment, and wages. The model's fit is good. The estimated model implies that more productive firms in each cohort grow faster and consequently crowd out less productive firms in steady state. This selection effect accounts for 53% of aggregate growth in the estimated version of the model.
Journal Article
EQUILIBRIUM LABOR TURNOVER, FIRM GROWTH, AND UNEMPLOYMENT
This paper considers equilibrium quit turnover in a frictional labor market with costly hiring by firms, where large firms employ many workers and face both aggregate and firm specific productivity shocks. There is exogenous firm turnover as new (small) startups enter the market over time, while some existing firms fail and exit. Individual firm growth rates are disperse and evolve stochastically. The paper highlights how dynamic monopsony, where firms trade off lower wages against higher (endogenous) employee quit rates, yields excessive job-to-job quits. Such quits directly crowd out the reemployment prospects of the unemployed. With finite firm productivity states, stochastic equilibrium is fully tractable and can be computed using standard numerical techniques.
Journal Article
Wage Differentials, Employer Size, and Unemployment
The unique equilibrium solution to a game in which a continuum of individual employers choose permanent wage offers and a continuum of workers search by sequentially sampling from the set of offers is characterized. Wage dispersion is a robust outcome provided that workers search while employed as well as when unemployed. The unique nondegenerate equilibrium distribution of wage offers is constructed for three cases: (i) identical workers and employers, (ii) identical employers and an atomless distribution of worker supply prices, and (iii) identical workers and an atomless distribution of job productivities.
Journal Article
On‐the‐Job Search and the Wage Distribution
The article structually estimates an on‐the‐job search model of job separations. Given each employer pays observably equivalent workers the same but wages are dispersed across employers, an employer's separation flow is the sum of an exogenous outflow unrelated to the wage and a job‐to‐job flow that decreases with the employer's wage. Using data from the Danish Integrated Database for Labour Market Research, the empirical results imply, as predicted by theory, that search effort declines with the wage. Furthermore, the estimates explain the employment effect, defined as the horizontal difference between the distribution of wages earned and the wage offer distribution.
Journal Article
Wage Dispersion in the Search and Matching Model
The purpose of this paper is to show that a dispersed wage steady state equilibrium exists in a version of the search and matching model in which firms have many employees, face diminishing returns in production, and wages are the outcome of intrafirm bargaining and establish that a unique degenerative wage equilibrium exists in this environment if employed workers do not search. In this paper, I prove that with a unique dispersed wage equilibrium with the property that more productive employers pay more also exists in the same environment if employed workers can search. Furthermore, the labor market tightness and aggregate employment are lower in the dispersed wage equilibrium than in the degenerate equilibrium because the ability of the worker to move to another firm adds to the employer's anticipated cost of adding another worker. Finally, note that the existence of other dispersed wage equilibria in which some less productive firms offer higher wages is not ruled out.
Journal Article
COMPETITIVE PRICING AND EFFICIENCY IN SEARCH EQUILIBRIUM
We consolidate and generalize some results on price determination and efficiency in search equilibrium. Extending models by Rubinstein and Wolinsky and by Gale, heterogeneous buyers and sellers meet according to a general matching technology and prices are determined by a general bargaining condition. When the discount rate r and search costs converge to 0, we show that prices in all exchanges are the same and equal the competitive, market clearing, price. Given positive search costs, efficiency obtains iff bargaining satisfies Hosios' condition and r = 0. When prices are set by third-party market makers, however, we show that search equilibrium is necessarily efficient.
Journal Article
Job Creation and Job Destruction in the Theory of Unemployment
In this paper we model a job-specific shock process in the matching model of unemployment with non-cooperative wage behaviour. We obtain endogenous job creation and job destruction processes and study their properties. We show that an aggregate shock induces negative correlation between job creation and job destruction whereas a dispersion shock induces positive correlation. The job destruction process is shown to have more volatile dynamics than the job creation process. In simulations we show that an aggregate shock process proxies reasonably well the cyclical behaviour of job creation and job destruction in the United States.
Journal Article