Time Consuming Labor Mobility and Dynamic Behavior

Abstract

This paper attempts to construct a dynamic model of the labor market which consists of two distinctive but interrelated sectors, assuming that it takes time to complete migration. Implications of the model are consistent with stylized facts of the labor market. The model shows that fluctuations in contract sector employment are greater than those in spot sector employment and that contract sector wage rates fluctuate less than spot sector wage rates. It also shows the countercyclical movement of intersectoral wage differentials. And the model suggests that a temporary shock generates persistent movements of wage rates and employment.