Selective hiring and welfare analysis in labor market models

Worker Selection, Hiring, and Vacancies

“…Further, wages at a firing firm are such that V n (n , ε) = V u . This is implied by equation (13). Finally, as I conjectured, both wage functions depend only on the total number of productive workers and not separately on the number of productive and unproductive workers.…”

“…12 Following Mortensen and Nagypal (2007), I set the ratio of b to Y /N to 0.72. 13 Furthermore, I normalize the equilibrium value of Ω to 1 and choose A to satisfy this equilibrium value.…”

“…Let s and τ denote a hiring subsidy and a firing tax, respectively, measured in terms of the consumption good. Then, the Stole-Zwiebel bargaining rules defined in equations (13) and 14become…”

“…4. Wage Bargaining: The wage equations, w n (n , ε) and w p (n , ε, p), satisfy (12), (13) and (14).…”

“…On the one hand, existing worker selection models are not suitable for studying the cross-sectional properties of hires and vacancies, because they assume that firms either have a vacant position or are employed with only one worker. Mortensen and Pissarides (2001), Pries and Rogerson (2005), Villena-Roldan (2008) and Merkl and van Rens (2013) are examples of worker selection models of this kind. 2 On the other hand, extensions to the standard DMP model assume workers are identical and, therefore, imply that firms indiscriminately hire all the workers they match.…”