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Matching, Search, and Heterogeneity

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Author Info
Robert Shimer (Princeton)
Lones Smith (University of Michigan)

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Abstract

This paper explores the efficiency of decentralized search behavior and matching patterns in a model with ex ante heterogeneity and a constant returns to scale search technology. We show that a linear tax or subsidy on search intensity decentralizes the social optimum. In the absence of the tax, high productivity agents are too willing to match, yet they search too little. Low productivity agents have the opposite behavior. As a result, the equilibrium is always inefficient in the absence of taxes, in contrast to known results on the efficiency of decentralized search models with homogeneous agents. We relate the inefficiencies to thick-market and congestion externalities.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Macroeconomics.

Volume (Year): 1 (2001)
Issue (Month): advances/1/1 ()
Pages: 1010-1010
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Handle: RePEc:bep:macadv:v:1:y:2001:i:advances/1/1:p:1010-1010

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Related research
Keywords: search matching externality congestion thick-market

Find related papers by JEL classification:
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December. [Downloadable!] (restricted)
  2. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 57(2), pages 279-98, April. [Downloadable!] (restricted)
  3. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    Other versions:
  4. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October. [Downloadable!] (restricted)
    Other versions:
  5. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1989-1), pages 1-76. [Downloadable!]
    Other versions:
  6. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Damiano, Ettore & Li, Hao & Suen, Wing, 2004. "Unraveling of Dynamic Sorting," Micro Theory Working Papers damiano-04-08-11-03-02-02, Microeconomics.ca Website, revised 11 Aug 2004. [Downloadable!]
    Other versions:
  2. Matteo Richiardi, 2003. "A Search Model of Unemployment and Firm Dynamics," LABORatorio R. Revelli Working Papers Series 30, LABORatorio R. Revelli, Centre for Employment Studies. [Downloadable!]
  3. Maite Blázquez & Marcel Jansen, 2003. "Efficiency In A Matching Model With Heterogeneous Agents: Too Many Good Or Bad Jobs?," Economics Working Papers we035019, Universidad Carlos III, Departamento de Economía. [Downloadable!]
    Other versions:
  4. Simon D. Woodcock, 2005. "Heterogeneity and Learning in Labor Markets," Labor and Demography 0511012, EconWPA. [Downloadable!]
  5. Coen N. Teulings & Pieter A. Gautier, 2000. "The Right Man for the Job - Increasing Returns in Search?," Tinbergen Institute Discussion Papers 00-038/3, Tinbergen Institute. [Downloadable!]
    Other versions:
  6. Michelacci, Claudio & Suarez, Javier, 2002. "Incomplete Wage Posting," CEPR Discussion Papers 3658, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  7. Leon J.H. Bettendorf & D. Peter Broer, 2003. "Lifetime Labor Supply in a Search Model of Unemployment," Tinbergen Institute Discussion Papers 03-032/2, Tinbergen Institute. [Downloadable!]
  8. Ronald Bachmann, 2005. "Skill mismatch in equilibrium unemployment," SFB 649 Discussion Papers SFB649DP2005-034, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany, revised Aug 2005. [Downloadable!]
  9. Decreuse, Bruno, 2003. "Choosy search and the mismatch of talents," MPRA Paper 3636, University Library of Munich, Germany, revised Feb 2007. [Downloadable!]
  10. Godfrey Keller & Kevin Roberts & Margaret Stevens, 2007. "Unemployment, Particiation and Market Size," Economics Series Working Papers 362, University of Oxford, Department of Economics. [Downloadable!]
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