Firm growth and worker turnover in frictional labour markets

This dissertation contributes to the analysis of firm heterogeneity, turnover, and worker reallocation in frictional labour markets. Chapter 1 presents empirical evidence using German longitudinal matched employer-employee data on the relationship between worker flows and employer characteristics. In particular, the analysis distinguishes between employer-to-employer reallocations and movements into and out of non-employment. It also documents the relationship between worker movements and establishment wage, size and age. The empirical results constitute a motivation for the following chapters. Chapter 2 analyses equilibrium in a labour market characterised by a stationary growth economy with heterogeneous firms and frictional unemployment. The model extends the Coles and Mortensen (2016) framework in two directions: it introduces vintage effects and endogenous worker search effort. New start-up firms are created with a productivity drawn from a technology frontier which grows over time. However, as a given firm’s productivity is fixed, its quality declines relative to the market average. In addition, workers can choose their search intensity. Chapter 3 provides a quantitative exploration of the theoretical model presented in Chapter 2. It estimates the parameters of the model using simulated minimum distance and evaluates its performance in capturing some features of the data: in particular, the model is able to match the establishment size distribution and the relationship between hires and employment.