Labor Market Frictions, Firm Growth, and International Trade

This paper develops a model to study the aggregate effects of labor market frictions in an open economy through their impact on the growth and investment decisions of firms. The model features interactions between firms' dynamic fixed investments in exporting and search frictions with job-to-job mobility. Search frictions in worker transitions between jobs induce slow firm growth and are a source of dispersion in firm size and revenue per worker. The model is tractable for general-equilibrium analysis and accommodates several extensions which are useful for quantitative work. A calibration to Argentina's economy that matches data on firm growth, worker transitions between firms and export dynamics suggests that frictions in job-to-job mobility may have considerable effects on firm growth and aggregate outcomes.