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Matching workers

Moen, Espen R. and Yashiv, Eran (2016) Matching workers. CFM discussion paper series, CFM-DP2016-16. Centre For Macroeconomics, London, UK.

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Abstract

This paper studies the matching of workers within the firm when the productivity of workers depends on how well they match with their co-workers. The firm acts as a coordinating device and derives value from this role. It is shown that a worker's contribution to firm value changes over time in a non-trivial way as co-workers are replaced by new workers. The paper derives optimal hiring and replacement policies, including an optimal stopping rule, and characterizes the resulting equilibrium in terms of worker flows, firm output and the distribution of firm values. Simulations of the model reveal a rich pattern of worker turnover dynamics and their connections to the resulting firm values distribution. The paper stresses the role of horizontal differences in worker productivity, which are different from vertical, assortative matching issues. It derives the rent from organizational capital, with worker complementarities playing a key role. We compare the model to match-specific productivity models and explore the essential differences, with the emphasis laid on worker interactions and complementarities.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.centreformacroeconomics.ac.uk/Home.aspx
Additional Information: © 2016 The Authors
Subjects: H Social Sciences > HB Economic Theory
JEL classification: D - Microeconomics > D2 - Production and Organizations > D23 - Organizational Behavior; Transaction Costs; Property Rights
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E23 - Production
E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
J - Labor and Demographic Economics > J2 - Time Allocation, Work Behavior, and Employment Determination and Creation; Human Capital; Retirement > J24 - Human Capital; Skills; Occupational Choice; Labor Productivity
Sets: Research centres and groups > Centre for Macroeconomics
Date Deposited: 13 Dec 2017 09:09
Last Modified: 13 Dec 2017 15:37
URI: http://eprints.lse.ac.uk/id/eprint/86231

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