Occupational Reallocation Within and Across Firms: Implications for labor-market polarization

Author Name MUKOYAMA Toshihiko (Georgetown University) / TAKAYAMA Naoki (Hitotsubashi University) / TANAKA Satoshi (University of Queensland)
Creation Date/NO. July 2023 23-E-051
Research Project Macroeconomic and social security policies under demographic aging: dynamics of firms, individuals and inequality
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This study analyzes how labor-market frictions interact with firms' decisions to reallocate workers across different occupations during labor-market polarization. We compare the patterns of occupational reallocation within and across firms in the United States and Germany in recent years. We find that within-firm reallocation contributes significantly to the decline in employment in routine occupations in Germany, but much less in the United States. We construct a general equilibrium model of firm dynamics and find that the model with different firing taxes can replicate the difference in firm-level adjustment patterns across these countries. We conduct two counterfactual experiments, highlighting the different roles played by the within-firm cost of reorganizing occupational mix and across-firm frictions created by firing taxes.