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The Right Man for the Job

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Author Info
Coen N. Teulings
Pieter A. Gautier

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Abstract

This paper describes a search model with a continuum of worker and job types, free entry and transferable utility. We apply a second-order Taylor expansion to characterize the equilibrium, derive the "cost of search" and show that it is decreasing in the substitutability of worker types. This cost of search is then decomposed into three components: unemployment, vacancy costs and mismatch. Our contact technology rules out congestion effects between different worker types and therefore exhibits increasing returns to scale. One third of those increasing returns in contacts are shown to be absorbed by firms and workers being more choosy. The resulting equilibrium is not efficient. Unemployment benefits can reduce the loss by serving as a search subsidy. Numerical simulations of the model show that our Taylor expansions are quite accurate. Copyright The Review of Economic Studies Limited, 2004.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 71 (2004)
Issue (Month): 2 (04)
Pages: 553-580
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Handle: RePEc:bla:restud:v:71:y:2004:i:2:p:553-580

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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. Berman, Eli, 1997. "Help Wanted, Job Needed: Estimates of a Matching Function from Employment Service Data," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S251-92, January. [Downloadable!] (restricted)
  2. Burdett, Kenneth & Coles, Melvyn G, 1999. "Long-Term Partnership Formation: Marriage and Employment," Economic Journal, Royal Economic Society, vol. 109(456), pages F307-34, June. [Downloadable!] (restricted)
  3. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
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  4. Meyer, Bruce D, 1990. "Unemployment Insurance and Unemployment Spells," Econometrica, Econometric Society, vol. 58(4), pages 757-82, July. [Downloadable!] (restricted)
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  5. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb.. [Downloadable!] (restricted)
  6. 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)
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  7. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," Economics Working Papers 211, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
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  8. Teulings, Coen N, 1995. "The Wage Distribution in a Model of the Assignment of Skills to Jobs," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 280-315, April. [Downloadable!] (restricted)
  9. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March. [Downloadable!] (restricted)
  10. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  11. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 397-415, July. [Downloadable!] (restricted)
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  12. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier. [Downloadable!] (restricted)
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  13. 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)
  14. Burdett, Kenneth, 1979. "Unemployment Insurance Payments as a Search Subsidy: A Theoretical Analysis," Economic Inquiry, Oxford University Press, vol. 17(3), pages 333-43, July.
  15. Diamond, Peter A, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Blackwell Publishing, vol. 49(2), pages 217-27, April. [Downloadable!] (restricted)
  16. Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May. [Downloadable!] (restricted)
  17. Robert Shimer, 1999. "The Impact of Young Workers on the Aggregate Labor Market," NBER Working Papers 7306, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-68, May. [Downloadable!] (restricted)
  19. Lones Smith, 1995. "Cross-Sectional Dynamics in a Two-Sided Matching Model," Working papers 95-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  20. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
  21. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June. [Downloadable!] (restricted)
  22. P. Diamond, 1980. "Mobility Costs, Frictional Unemployment and Efficiency," Working papers 257, Massachusetts Institute of Technology (MIT), Department of Economics.
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  23. Burdett, Kenneth & Coles, Melvyn G & van Ours, Jan C, 1994. "Temporal Aggregation Bias in Stock-Flow Models," CEPR Discussion Papers 967, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  24. Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Blackwell Publishing, vol. 61(3), pages 457-75, July. [Downloadable!] (restricted)
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  25. Coen N. Teulings & José A.C. Vieira, 1998. "Urban versus Rural Return to Human Capital in Portugal, A Cook-Book Recipe for Applying Assignment Models," Tinbergen Institute Discussion Papers 98-095/3, Tinbergen Institute, revised 20 Sep 2002. [Downloadable!]
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. Gautier, Pieter A & Teulings, Coen N, 2005. "How Large are Search Frictions?," CEPR Discussion Papers 5229, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  2. Gautier, Pieter A & Svarer, Michael & Teulings, Coen N, 2005. "Marriage and the City," CEPR Discussion Papers 4939, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  3. Bruno Crépon & Muriel Dejemeppe & Marc Gurgand, 2005. "Counseling the Unemployed: Does It Lower Unemployment Duration and Recurrence?," IZA Discussion Papers 1796, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  4. Decreuse, Bruno, 2003. "Choosy search and the mismatch of talents," MPRA Paper 3636, University Library of Munich, Germany, revised Feb 2007. [Downloadable!]
    Other versions:
  5. Pieter A. Gautier & Coenraad N. Teulings & Aico van Vuuren, 2005. "On-the-Job Search and Sorting," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
    Other versions:
  6. Fitzenberger, Bernd & Garloff, Alfred, 2005. "Descriptive Evidence on Labor Market Transitions and the Wage Structure in Germany," ZEW Discussion Papers 05-95, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
  7. Ernesto Villanueva, 2004. "Compensating Wage Differentials and Voluntary Job Changes: Evidence from West Germany," Economics Working Papers 738, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  8. Nicolas L. Jacquet & Serene Tan, 2007. "On the Segmentation of Markets," Working Papers 18-2007, Singapore Management University, School of Economics. [Downloadable!]
  9. Gautier, Pieter A & Moraga-González, José-Luis & Wolthoff, Ronald, 2007. "Structural Estimation of Search Intensity: Do Non-Employed Workers Search Enough?," CEPR Discussion Papers 6440, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  10. Melvyn G. Coles & Marco Francesconi, 2007. "On the Emergence of Toyboys: Equilibrium Matching with Ageing and Uncertain Careers," IZA Discussion Papers 2612, Institute for the Study of Labor (IZA). [Downloadable!]
  11. C.N. Teulings & P.A. Gautier, 2002. "Search and the City," Tinbergen Institute Discussion Papers 02-061/3, Tinbergen Institute. [Downloadable!]
  12. Bernd Fitzenberger & Alfred Garloff, 2006. "Descriptive Evidence on Labor Market Transitions and the Wage Structure in Germany," Working Papers of the Research Group Heterogenous Labor 06-02, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim. [Downloadable!]
  13. Alison Booth & Melvyn Coles, 2005. "Education, Matching and the Allocative Value of Romance," IZA Discussion Papers 1649, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  14. Jan Rouwendal & Willemijn van der Straaten, 2003. "Dual Earners, Urban Labor Markets and Housing Demand," Tinbergen Institute Discussion Papers 03-084/3, Tinbergen Institute. [Downloadable!]
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