Report
Firm Dynamics and Random Search over the Business Cycle
Abstract: I build a tractable random search model with firm dynamics, on-the-job search, and aggregate shocks. Multi-worker firms make recruitment decisions, choose whether to enter or exit the market, and design wage contracts. Tractability is obtained by showing that, under a set of assumptions on the recruitment technology, the decisions of workers and firms depend on the firms’ current productivity. I confront the model to salient business cycle moments on the reallocation of workers across the firm productivity distribution derived from firm-level data that the model successfully replicates. I use this framework to quantify the drivers of worker reallocation over the post-war business cycle in Britain.
JEL Classification: E3; J63; J64;
https://doi.org/10.59576/sr.1069
Access Documents
File(s):
File format is application/pdf
https://www.newyorkfed.org/medialibrary/media/research/staff_reports/sr1069.pdf
Description: Full text
File(s):
File format is text/html
https://www.newyorkfed.org/research/staff_reports/sr1069.html
Description: Summary
Authors
Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Staff Reports
Publication Date: 2023-08-01
Number: 1069
Note: Revised August 2025.