Worker Flows and Job Flows: A Quantitative Investigation

This paper studies cyclical properties of worker flows and job flows simultaneously in a multiple-worker version of the search/matching model where firms decide how many workers they hire or shed under the presence of idiosyncratic and aggregate uncertainties. Wages are determined by intra-firm bargaining between a firm and its multiple workers. Our calibration incorporates microand macro-level evidence on worker and job flows. We show that the dynamic stochastic equilibrium of the model successfully replicates important cyclical features of worker flows and job flows. In particular, the model correctly predicts that hires from unemployment move countercyclically while the job creation rate move procyclically. We also show that the multiple-worker-firm model improves on the quantitative performance of the standard search/matching framework. First, the model fully accounts for volatilities of unemployment and vacancies when the outside option parameter is at 80% of aggregate labor productivity. Second, the model generates the strong negative relationship between unemployment and vacancies. JEL Classification: E24, E32, J63, J64