Research

Abstract: The allocation of workers across occupations is a key aspect of the labor market, and it is shaped by firms’ internal organization. We document a novel empirical pattern of sorting between workers and multi-worker firms using administrative data from Germany. Looking at job switchers, we find that workers that switch to higher paying firms, on average, find themselves with more subordinates on the firm wage distribution, but at a lower relative rank within the firm. These patterns imply negative assortative matching across layers but positive assortative matching across ranks. We build a tractable many-to-one assignment model with endogenous firm structure choice that allow us to tackle to question of how structure choice shapes sorting. Firms choose how many layers they want to organize their production in, so each job is indexed by a pair of firm productivity and its position in the firm hierarchy. The model rationalizes the evidence by generating negative assortative matching across layers but positive assortative matching across ranks and delivers a parsimonious way to compare jobs across firms. We provide a sufficient condition for positive sorting, namely that task importance at higher layers cannot rise too steeply relative to lower layers. The framework nests extensions with peer effects and search frictions while matching additional moments on wage dispersion.

Abstract: We develop a model of search in OTC markets with asymmetric information and trade occurring under double-sided uncertainty over asset quality, where holding the asset does not necessarily translate into knowing its quality. This leads to deterioration of market information conditions over subsequent trades, causing both sellers and buyers to become more pessimistic even though aggregate asset quality remains unchanged. If re-trade opportunities are frequent, information in the economy becomes coarser, hindering market liquidity and volume of trade.