Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/95272
Authors: 
Colciago, Andrea
Rossi, Lorenza
Year of Publication: 
2011
Series/Report no.: 
Quaderni di Dipartimento 155
Abstract: 
We propose a model characterized by strategic interactions among an endogenous number of producers and search and matching frictions in the labor market. In line with U.S. data: (i) new firms account for a relatively small share of overall employment, but they create a relevant fraction of new jobs; (ii) firms’ entry is procyclical; (iii) price mark ups are countercyclical, while aggregate profits are procyclical. In response to a technology shock the labor share decreases on impact and overshoots its long run level. Also the propagation on labor market variables is stronger than in the standard search model. We argue that the countercyclicality of the price mark up is the key mechanism for our results.
Subjects: 
Endogenous Market Structures
Job Creation
Firms’ Entry
Search and Matching Frictions
JEL: 
E24
E32
L11
Document Type: 
Working Paper

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