This paper incorporates worker selection into a random matching model with multi-worker firms. Unlike the standard Diamond-Mortensen-Pissarides (DMP) model, the extended model is compatible with cross-sectional behavior of vacancy yields, which rise with employment growth and worker turnover, but fall with establishment size. Using calibrated versions of the standard and worker selection models, I show that accounting for these patterns has quantitatively important policy implications. I also compare the worker selection and the directed search models. While both models account for these patterns equally well, they differ with regard to labor market policy. (JEL E24, J23, J63, J64)
Financial institutions are exempt from the value‐added tax (VAT) in most countries. We develop a general equilibrium model with endogenous firm entry and a banking sector to accommodate three key distortions related to exempt treatment: (i) self‐supply bias in the banking sector, (ii) under‐taxation of payment services, and (iii) input distortions in the business sector and tax cascading. We calibrate our model to the average of Germany, France, and the UK data. Our results show that repealing exempt treatment always increases tax revenues. However, welfare gains occur only at low VAT rates due to the hump‐shaped VAT Laffer curve.
This dissertation explores job matching process in the labor market and its implications for job match quality. The first chapter develops a theory of a firm's recruitment activities where the firm optimally chooses the quality of its workforce through worker selection, and studies its policy implications. The second chapter studies the cyclical behavior of match quality using a micro-level dataset. In the first chapter, I incorporate worker selection into a random matching model with multi-worker firms. Unlike the standard random matching model, the worker selection model is compatible with establishment-level behavior of the hires-to-vacancy ratio, which (i) steeply rises with the employment growth rate, (ii) falls with establishment size, and (iii) rises with worker turnover rate. I calibrate the worker selection model to match the salient features of the U.S. labor market and compare it with the standard matching model without worker selection. I show that accounting for these patterns has both aggregate and firm-level implications for labor market policies. A hiring subsidy reduces aggregate unemployment substantially in the worker selection model, whereas the reduction in aggregate unemployment is very small in the standard model. Similarly, a firing tax reduces aggregate unemployment more in the worker selection model. At the firm level, labor market policy changes have a relatively bigger impact on fast growing and high worker turnover firms in the worker selection model. In contrast, the standard model implies that slowly growing and low worker turnover firms are affected relatively more by labor market policy changes. The exist-sleepless nights we were working together before deadlines, and for all the fun we have had in the last six years. A special thanks for Zhou (Jo) Zhang for helping me edit this dissertation. No words fit to express my love and gratitude to my parents, Huseyin and Aysel, who stood with me with their prayers, support, and encouragement all these years. Last, but not least, I would like to thank my wife, Milay, for her understanding and love, and my sweetheart, our baby daughter Armin Ada, whose love is worth it all. They were always there cheering me up and stood by me through the good times
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.