On-the-job search and labor market reallocation

Murat Tasci

No 725, Working Papers (Old Series) from Federal Reserve Bank of Cleveland

Abstract: This paper studies amplification of productivity shocks in labor markets through on-the-job-search. There is incomplete information about the quality of the employee-firm match which provides persistence in employment relationships and the rationale for on-the-job search. Amplification arises because productivity changes not only affect firms? probability of contacting unemployed workers but also of contacting already employed workers. Since higher productivity raises the value of all matches, even low quality matches become productive enough to survive in expansions. Therefore the measure of workers in low quality matches is greater when productivity is high, implying a higher probability of switching to another match. In other words, firms are more likely to meet employed workers in expansions and those they meet are more likely to accept a firm?s job offer because they are more likely to be employed in a low quality match. This introduces strongly procyclical labor market reallocation through procyclical job-to-job transitions.

Keywords: Job hunting; Labor market; Business cycles (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-lab and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (22)

Downloads: (external link)
https://doi.org/10.26509/frbc-wp-200725 Persistent link
https://www.clevelandfed.org/-/media/project/cleve ... eal-location-pdf.pdf Full text (application/pdf)

Related works:
Working Paper: On-the-Job Search and Labor Market Reallocation (2006)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedcwp:0725

Ordering information: This working paper can be ordered from

DOI: 10.26509/frbc-wp-200725

Access Statistics for this paper

More papers in Working Papers (Old Series) from Federal Reserve Bank of Cleveland Contact information at EDIRC.
Bibliographic data for series maintained by 4D Library ().