Essays on the Aggregate Labor Market

Abstract

This collection of essays studies issues related to the aggregate labor market. Chapter 1 documents that life-cycle wage growth and the fluidity of labor markets differ substantially across countries, and that the two strongly co-vary across countries. I propose a model of on-the-job accumulation of human capital in a frictional labor market, which explains this pattern as a result of differences in institutions that impact labor market fluidity and implies an important effect of labor market fluidity on the stock of human capital in the economy. Chapter 2 assesses the impact of aging of the US labor force over the past decades on the functioning of the labor market as well as aggregate economic outcomes. I develop a novel theory that links firm and worker dynamics to economic growth and demographic change, and use it to argue that aging has led to a large decline in dynamism of the US economy and a quarter of a percentage point decline in annual economic growth. Chapter 3 develops a model of application flows, worker flows and screening by firms to interpret recent empirical evidence that search behavior differs substantially between the unemployed and employed. The model matches well such empirical patterns, and implies substantially greater amplification of aggregate productivity shocks.