Job to job movements in a simple search model

On the job search is a key feature of real life labor markets. In this paper we present a tractable search model, closely related to the competitive model, in which on-the-job search and wage differentials for identical workers are an optimal response to search frictions and heterogeneous firms. Our model is laid out in detail in ongoing research by Garibaldi and Moen (2009). The model has three key elements. First, it applies the competitive search equilibrium concept, initially proposed by Moen (1997). Thus, firms post wages and vacancies to minimize search and waiting costs, and the labor market is endogenously separated into submarkets. Second, firms have convex costs of main-taining vacancies (in our simulations, the number o