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Understanding Labour Market Frictions: An Asset Pricing Approach

Basu, P.

Authors



Abstract

Labour market friction is viewed in terms of the market value of an employed worker as opposed to the position of the Beveridge curve. This market value of an installed worker, which I call Tobin's Q of a worker, is inversely proportional to the average quality of the match between employers and workers. Based on this measure, I find that the labour market friction rises during a period of productivity boom. This phenomenon is indirectly supported by the data where it is found that the relative value of a worker with respect to tangible capital shows a positive association with the total factor productivity. The model suggests that firms may be compromising the quality of a skill match during a period of tight labour market conditions.

Citation

Basu, P. (2009). Understanding Labour Market Frictions: An Asset Pricing Approach. Bulletin of Economic Research, 61(4), 305-324. https://doi.org/10.1111/j.1467-8586.2008.00295.x

Journal Article Type Article
Publication Date Oct 1, 2009
Deposit Date Oct 2, 2009
Journal Bulletin of Economic Research
Print ISSN 0307-3378
Electronic ISSN 1467-8586
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 61
Issue 4
Pages 305-324
DOI https://doi.org/10.1111/j.1467-8586.2008.00295.x
Keywords Beveridge curve, Friction, Tobin's Q.
Public URL https://durham-repository.worktribe.com/output/1554425

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