The Department of Economics Macroeconomics Seminar Series presents

"Labor Market Frictions, Firm Growth, and International Trade"
with Pablo Fajgelbaum, Assistant Professor of Economics, UCLA

Wednesday, June 6, 2012
11:30 a.m.-1:00 p.m.
Social Science Plaza A, Room 3132

Hiring new workers is costly and time consuming, yet many forms of investment have a fixed-cost component and can be profitably undertaken only by large producers. In his talk, Fajgelbaum will address how characteristics of the labor market impact income, trade and welfare via the time it takes for firms to grow large enough to justify investing in exporting or in upgrading technology. In the theory, firms make random contacts with potential employees slowly and labor market conditions determine the ease of hiring employed or unemployed workers. Firms choose an optimal time to invest in the light of their anticipated labor market experience. He uses the model to examine the impact of labor market frictions on aggregate outcomes in general equilibrium. Lower frictions in job-to-job mobility strengthen firms incentives to invest, and the economy gains from labor market policies that encourage investment in the trading partner. The model predictions are consistent with observed correlations between firm size, age and export activity, and also with observed correlations between export activity and the share of new hires attracted from other jobs and from other exporting firms. He uses an extended version of the model with ex-ante differences in rm productivity to match these moments in the data, to then simulate changes in the labor market and trading environments.

For further information, please contact Gloria Simpson, or 949-824-5788.

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