Working Paper: NBER ID: w13777
Authors: Michael W.L. Elsby; Ryan Michaels
Abstract: This paper introduces a notion of fir m size into a search and matching model with endogenous job destruction. The outcome is a rich, yet analytically tractable framework that can be used to analyze a broad set of features of both the cross section and the dynamics of the aggregate labor market. In a set of quantitative applications we show that the model can provide a coherent account of a) the salient features of the distributions of employer size, and employment growth across establishments; b) the amplitude and propagation of cyclical fluctuations in flows between employment and unemployment; c) the negative comovement of unemployment and vacancies in the form of the Beveridge curve; and d) the dynamics of the distribution of employer size over the business cycle.
Keywords: Labor Market Dynamics; Firm Size; Unemployment; Job Flows
JEL Codes: E24; E32; J63; J64
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firm size (L25) | employment dynamics (J63) |
| aggregate productivity (E23) | hiring decisions (M51) |
| hiring decisions (M51) | unemployment rates (J64) |
| unemployment (J64) | vacancies (J63) |
| economic conditions (E66) | size distribution of firms (L25) |