Worker replacement

Guido Menzio, Espen R. Moen

    Research output: Contribution to journalArticle

    Abstract

    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.

    Original languageEnglish (US)
    Pages (from-to)623-636
    Number of pages14
    JournalJournal of Monetary Economics
    Volume57
    Issue number6
    DOIs
    StatePublished - Sep 1 2010

    Fingerprint

    Wages
    Workers
    Replacement
    Employees
    Wage policy
    Tenure
    Hiring
    Fluctuations
    Rigidity
    Labour market
    Unemployment
    Income
    Productivity

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics

    Cite this

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

    In: Journal of Monetary Economics, Vol. 57, No. 6, 01.09.2010, p. 623-636.

    Research output: Contribution to journalArticle

    Menzio, G & Moen, ER 2010, 'Worker replacement', Journal of Monetary Economics, vol. 57, no. 6, pp. 623-636. https://doi.org/10.1016/j.jmoneco.2010.05.015
    Menzio, Guido ; Moen, Espen R. / Worker replacement. In: Journal of Monetary Economics. 2010 ; Vol. 57, No. 6. pp. 623-636.
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