Reorganization of Firms and Job Stability: A Theoretical Approach

This paper seeks to provide a theoretical explanation to the contradictory results found by the empirical literature concerning the effects of recent workplace organizational changes on job stability. We develop an endogenous job destruction model à la Mortensen-Pissarides (1994) where a modernizing firm may offer to the worker a tayloristic job (traditional organization) or a holistic job (modern organization). We then study the evolution of job stability during the transition from a tayloristic to a holistic organization. Our results point towards the importance of the restructuring costs supported by firms during the modernizing trajectory as the main factor responsible for the variations in job stability. Copyright 2007 The Author; Journal compilation 2007 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd..