Rasmus Lentz

An Empirical Model of Growth Through Product Innovation

Productivity dispersion across firms is large and persistent, and worker reallocation among firms is an important source of productivity growth. The purpose of the paper is to estimate the structure of an equilibrium model of growth through innovation. The model is a modified version of the Schumpeterian theory of firm evolution and growth developed by Klette and Kortum (2002). The data set is a panel of Danish firms than includes information on value added, employment, and wages. The model’s fit is good and the structural parameter estimates have interesting implications for the aggregate growth rate and the contribution of worker reallocation to it.

Sorting in a General Equilibrium On-the-Job Search Model

In this paper, I analyze a general equilibrium on-the-job search model with endogenous search intensity and heterogenous workers and firms. I provide proof of existence and uniqueness of steady state equilibrium. In equilibrium equally efficient search on and off the job and supermodularity of the production function imply that higher skilled workers are matched with more productive firms in the sense that the steady state firm productivity distribution is stochastically increasing in worker skill. By implication, higher skilled workers on average match with more productive firms (that is, E[p|h] is increasing in h, where h is worker skill and p is firm productivity). In this sense, the positive assortative matching result in Becker (1973) is shown to generalize to this papers search friction setting. However, the positive assortative matching result does not generalize given the reverse conditioning; it need not be that E[h|p] is everywhere increasing in p.

Training and Search on the Job

The paper studies human capital accumulation over workers careers in an on the job search setting with heterogenous firms. In renegotiation proof employment contracts, more productive firms provide more training. Both general and specific training induce higher wages within jobs, and with future employers, even conditional on the future employer type. Because matches do not internalize the specific capital loss from employer changes, specific human capital can be over-accumulated, more so in low type firms. While validating the Acemoglu and Pischke (1999) mechanisms, the analysis nevertheless arrives at the opposite conclusion: That increased labor market friction reduces training in equilibrium.