Workers’ Job Prospects and Young Firm Dynamics

This paper investigates how worker beliefs and job prospects impact the wages and growth of young firms, as well as the aggregate economy.

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Seula Kim (The Pennsylvania State University)

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IWH, conference room and via Zoom

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Seula Kim is an Assistant Professor of Economics at the Pennsylvania State University. Her research interests are Macroeconomics, Firm Dynamics, Labor, Innovation.

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This paper investigates how worker beliefs and job prospects impact the wages and growth of young firms, as well as the aggregate economy. Building a heterogeneous-firm directed search model where workers gradually learn about firm types, I find that learning generates endogenous wage differentials for young firms. High-performing young firms must pay higher wages than equally high-performing old firms, while low-performing young firms offer lower wages than equally low-performing old firms. Reduced uncertainty or labor market frictions lower the wage differentials, thereby enhancing young firm dynamics and aggregate productivity. The results are consistent with U.S. administrative employee-employer matched data. Read more …