Authors: Richard Audoly
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Staff Reports
Firm Dynamics and Random Search over the Business Cycle
Number 1069
August 2023 Revised May 2024
August 2023 Revised May 2024
JEL classification: E3
I build a tractable random search model with firm dynamics, on-the-job search, and aggregate shocks. Multi-worker firms make recruitment decisions, choose whether to enter or exit the market, and design wage contracts. Tractability is obtained by showing that, under a set of assumptions on the recruitment technology, the decisions of workers and firms can be expressed in terms of the firms’ current productivity. I introduce a numerical solution method to accommodate aggregate shocks in this environment and show that the model can replicate salient features of both firm-level data on productivity and employment and aggregate time series describing the business cycle. I use this framework to quantify the drivers of worker reallocation over the recent business cycle in Britain.
Author Disclosure Statement(s)
Richard Audoly
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
The author declares that he has no relevant or material financial interests that relate to the research described in this paper. Prior to circulation, this paper was reviewed in accordance with the Federal Reserve Bank of New York review policy, available at https://www.newyorkfed.org/research/staff_reports/index.html.
Suggested Citation:
Audoly, Richard. 2023. “Firm Dynamics and Random Search over the Business Cycle.” Federal Reserve Bank of New York Staff Reports, no. 1069, August. https://doi.org/10.59576/sr.1069
Audoly, Richard. 2023. “Firm Dynamics and Random Search over the Business Cycle.” Federal Reserve Bank of New York Staff Reports, no. 1069, August. https://doi.org/10.59576/sr.1069
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