ESSAYS ON SEARCH AND MATCHING IN THE LABOR MARKET

I study the matching of heterogeneous workers and firms in the labor market. In particular, I examine how firm productivity shocks and the nature of decreas-ing returns affect positive assortative matching: outcomes where the best, most productive workers are employed by the most productive firms and the least pro-ductive workers are assigned to the least productive firms. Chapter one studies the relationship between worker-firm sorting and firm growth both empirically and theoretically. I use U.S. Census microdata to show that faster growing firms hire more productive workers, as measured by their lagged wages. This appears to be the first time that such a pattern has been documented. I interpret the pattern as evidence of positive assortative matching: faster growing, more productive firms tend to hire more productive workers. I develop a novel, analytically tractable search model and show that it can reproduce the observed patterns if there are strong complementarities in the production function. I also discuss the relationship between my empirical results and the previous literature on assortative matching. I argue that it is important to control for observable firm characteristics, whic