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June 15, 2016

Seminar

Firm dynamics with frictional product and labor markets

Date

June 15, 2016
12:00 - 13:15

Location

Gustav-Schmoller-Raum
DIW Berlin im Quartier 110
Room 3.3.002A
Mohrenstraße 58
10117 Berlin

Speaker

Leo Kaas, Universität Konstanz

We examine empirically and theoretically the joint dynamics of prices, output, employment and wages across firms. We first analyze administrative firm data for the German manufacturing sector for which price and quantity information at the nine-digit product level, together with employment, working hours and wages are available. We then develop a dynamic model of heterogeneous firms who compete for workers and customers in frictional labor and product markets. Prices and wages are dispersed across firms, reflecting differences in firm productivity and demand. Productivity and demand shocks have distinct implications for the firms' employment, output and price adjustments. In a quantitative analysis, we evaluate the model predictions against the data and we apply the model to examine the impact of product market deregulation.

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