Cross-sectional productivity dispersion is countercyclical, at the plant level and at the firm level. I incorporate a firm’s project choice decision into a firm dynamics model with business cycle features to explain this empirical finding both qualitatively and quantitatively. In particular,...

This paper nests a continuous-time learning model Jovanovic (1984) into a directed on-the-job search framework. We prove that the socially efficient allocation is separable, i.e., the workers' value functions and optimal controls are independent of both the distribution of workers across their...