Self-Enforced Job Matching

Abstract: The classic two-sided many-to-one job matching model assumes that firms treat workers as substitutes and workers ignore colleagues when choosing where to work. Relaxing these assumptions may lead to nonexistence of stable matchings. However, matching is often not a static allocation, but an ongoing process with long-lived firms and short-lived workers. We show that stability is always guaranteed dynamically when firms are patient, even with complementarities in firm technologies and peer effects in worker preferences. While no-poaching agreements are anti-competitive, they can maintain dynamic stability in markets that are otherwise unstable, which may contribute to their prevalence in labor markets.