Publication details for Professor Parantap BasuBasu, P. (2009). Understanding Labour Market Frictions: An Asset Pricing Approach. Bulletin of Economic Research 61(4): 305-324.
- Publication type: Journal papers: academic
- ISSN/ISBN: 0307-3378 (print), 1467-8586 (online)
- DOI: 10.1111/j.1467-8586.2008.00295.x
- Keywords: Beveridge curve • friction • Tobin's Q
- View online: Online version
- Durham research online: DRO record
Author(s) from Durham
Labour market friction is viewed in terms of the market value of an employed worker as opposed to the position of the Beveridge curve. This market value of an installed worker, which I call Tobin's Q of a worker, is inversely proportional to the average quality of the match between employers and workers. Based on this measure, I find that the labour market friction rises during a period of productivity boom. This phenomenon is indirectly supported by the data where it is found that the relative value of a worker with respect to tangible capital shows a positive association with the total factor productivity. The model suggests that firms may be compromising the quality of a skill match during a period of tight labour market conditions.
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