Worker replacement / Guido Menzio, Espen R. Moen Menzio, Guido

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Author
Menzio, Guido
Subjects
Labor turnover.; Seniority, Employee.; Wage differentials.
Summary
"Consider a labor market in which firms want to insure existing employees against income fluctuations and, simultaneously, want to recruit new employees to fill vacant jobs. Firms can commit to a wage policy, i.e. a policy that specifies the wage paid to their employees as a function of tenure, productivity and other observables. However, firms cannot commit to employ workers. In this environment, the optimal wage policy prescribes not only a rigid wage for senior workers, but also a downward rigid wage for new hires. The downward rigidity in the hiring wage magnifies the response of unemployment to negative shocks"--National Bureau of Economic Research web site.
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http://trove.nla.gov.au/work/3255312
Work ID
3255312

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