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The Right Man for the Job

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  • Coen N. Teulings
  • Pieter A. Gautier

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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Bibliographic Info

Article provided by Wiley Blackwell 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

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  1. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
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  8. Lones Smith, 1995. "Cross-Sectional Dynamics in a Two-Sided Matching Model," Working papers 95-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Diamond, Peter A, 1981. "Mobility Costs, Frictional Unemployment, and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 798-812, August.
  10. Shimer, R. & Smith, L., 1998. "Assortive Matching and Search," Papers 98-09, Michigan - Center for Research on Economic & Social Theory.
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  18. 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.
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  20. Coen N. Teulings & P.A. Gautier, 2002. "Search and the City," Tinbergen Institute Discussion Papers 02-061/3, Tinbergen Institute.
  21. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
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  25. 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.
  26. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
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  29. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
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  31. 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.
  32. 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.
  33. 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.
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