Time: 2023/04/14(Fri.), 13:30 -15:00 (Beijing Time)

Title:  Multidimensional Learning, Optimal Contract, and On-the-job Search

Venue:  Zhonghui Building 106

About the speaker:

Ji-Woong Moon is an assistant professor in the School of Economics at Shanghai University of Finance and Economics. He graduated from Pennsylvania State University in 2020. His research interests are in the macroeconomics of labor markets. His job market paper, which recently appeared in the Journal of Monetary Economics, examined how job referrals affect workers' on-the-job search behavior and its implications on the aggregate labor market outcomes.

Abstract:

We study a model with wage contracts and on-the-job search under uncertainty about worker ability and match quality. In our model, firms and workers learn about both uncertainties through output realizations. Within a job, wages respond to the beliefs according to contracts agreed upon at the beginning of the job, influencing workers' search decisions afterward. We show that the optimal contract has a continuous wage path and may have a flat period with random promotions and wage cuts over tenure. The optimal wage decreases with each marginal belief given promised value, but high-ability workers earn more and stay at a job longer because the optimal contract compensates for positive shocks with higher promised values. We discuss the implications of our model regarding the number of job-to-job transitions and wages, and the characteristics of workers experiencing wage reductions within a job.