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In this paper the authors build an integrated framework of the labor market in which worker replacement, job creation and job destruction are decided simultaneously at the firm level, providing a rigorous instrument for the analysis of worker flows. The main features of the model are uncertainty related to worker X firm match quality and search frictions. Worker flow components are decided as firms learn about the quality of their matches. A negative correlation between replacement and job creation arises from this mechanism. The model also provides several implications for firm dynamics, which are all confirmed by related empirical papers.
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