Directed search and job rotation

Li, Fei and Tian, Can (2011): Directed search and job rotation.

Abstract

In this note, 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 of rotating workers so as to partially overcome mismatch loss. As a result, in the unique symmetric subgame perfect equilibrium, large firms have higher labor productivity and lower separation rate. 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 exogenous productivity shock or imposing non-concave production function assumption.

• Item Type: MPRA Paper
• Language: English
• Keywords: Directed Search, Job Rotation, Firm Size and Wage, Firm Size and Labor Productivity
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L11 - Production, Pricing, and Market Structure; Size Distribution of Firms; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J31 - Wage Level and Structure; Wage Differentials; J - Labor and Demographic Economics > J6 - Mobility, Unemployment, and Vacancies > J64 - Unemployment: Models, Duration, Incidence, and Job Search

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