Job Ladders and Labor Productivity Dynamics

Recent microeconomic evidence suggests that the composition of match qualities among employed workers deteriorates in recessions. We interpret this as evidence of the destruction of valuable job ladders, a form an intangible capital. This paper builds an equilibrium search model with a stylized job ladder to study the relationship between the composition of match qualities and the dynamics of aggregate productivity and output. Our results show that shocks that destroy high quality matches and their associated job ladders can have signifcant and very persistent effects on labor productivity and output, even after aggregate employment has recovered.