An evolutionary model of industry dynamics and firms' institutional behavior with job search, bargaining and matching

• Type: Article in International Scientific Journal
• Date: 2012

Authors

Sandra Tavares Silva (Author) FEP; Jorge M S Valente (Author) FEP; Aurora A C Teixeira (Author) FEP

Journal

Title: Journal of Economic Interaction and Coordination

Vol. 7 No. 1

Pages: 23-61

ISSN: 1860-711X

Publisher: Springer Nature

Indexing

ISI Web of Knowledge - 6 Citations

ISI Web of Science

Scopus - 8 Citations

Scientific classification

FOS: Social sciences > Economics and Business

CORDIS: Social sciences > Economics > Labour market economcs

Other information

Authenticus ID: P-002-AXE

DOI: 10.1007/s11403-011-0085-y

Abstract (EN): By combining features from distinct theoretical approaches, namely the evolutionary and the job search, matching and bargaining literatures, we propose a model that captures the main dynamics of a world where heterogeneous firms and workers interact and co-evolve. Within a micro-meso framework, the model focuses on the influence of firms' labour choices ("institutional settings") on industry dynamics, taking into account the existence of employment adjustment costs. The consideration of endogenous matching and bargaining processes in the labour market results in significant frictions, such as the simultaneous coexistence of unfilled job vacancies and unemployment. In a setting where technological progress is not biased a stylized fact of industrialized world economies in the last few decades emerges, the increasing wage inequality. Additionally, turbulence in the industry increases after a negative demand shock. As expected, the negative demand shock causes a decrease in the number of vacancies and, consequently, unemployment rates increase considerably. Interestingly, and mimicking the recent experiences of countries such as US, Spain, Greece and Portugal, the rise in unemployment is matched by a rise in contractual wages. This outcome is explained by the lower ability of the firms to fill their posted vacancies, which results from friction in the interactions among agents.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 39