Abstract :
Workerheterogeneityinproductivityandlaborsupplyisintroducedintoamatching
model.Workerswhoearnhighwagesandworkhigh-hoursareidentifiedasthosewith
strongmarketcomparativeadvantage—high rentsfrombeingemployed.Themodelis
calibratedtomatchseparation,jobfinding,andemploymentintheSIPPdata.The
modelpredictsabigdropinemploymentforworkerswithweakcomparative
advantageduringrecessions.Butthedatashowthatworkerswithstrongcomparative
advantagealsodisplaysizableemploymentfluctuations,implyingthataggregate
employmentfluctuationsarenotexplainedbytheresponsesofworkerswithsmall
rentstoemployment
