This paper nests a continuous-time learning model Jovanovic (1984) into a directed on-the-job search framework. We prove that the socially efficient allocation is separable, i.e., the workers' value functions and optimal controls are independent of both the distribution of workers across their...

Cross-sectional productivity dispersion is countercyclical, at the plant level and at the firm level. I incorporate a firm’s project choice decision into a firm dynamics model with business cycle features to explain this empirical finding both qualitatively and quantitatively. In particular,...