A Theory of Turnover and Wage Dynamics

Jin Li, Jun Yu

Research output: Working paper

Abstract

We develop a model of turnover and wage dynamics with insurance, match-specific productivity, and long-term contracting. The model predicts that wages are downward rigid within firms but can decrease when workers are fired. We apply the model to study the impact of business cycles on subsequent wages and job mobility. Workers hired during a boom have persistent higher future wages if staying with the same firm. However, these boom hires are more likely to be terminated and have shorter employment spells.
Original languageEnglish (US)
Number of pages25
StatePublished - Jun 2015

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