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The Allocation of Labor and Endogenous Search Decisions

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  • Uren Lawrence

    ()
    (University of Melbourne)

Abstract

This paper examines the allocation of heterogeneous workers across sectors of an economy in which workers are able to direct their search towards particular firms. We find that search frictions, in addition to causing unemployment, may result in an inefficient allocation of labor. This result arises because of the interaction between the investment decisions of firms and the search decisions of workers. Despite constant returns to scale in both the matching and production functions, this interaction can generate multiple equilibria. The existence of multiple equilibria is shown to depend crucially on the direction of comparative advantage.

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File URL: http://www.degruyter.com/view/j/bejm.2006.6.issue-1/bejm.2006.6.1.1424/bejm.2006.6.1.1424.xml?format=INT
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Bibliographic Info

Article provided by De Gruyter in its journal The B.E. Journal of Macroeconomics.

Volume (Year): 6 (2006)
Issue (Month): 1 (June)
Pages: 1-31

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Handle: RePEc:bpj:bejmac:v:topics.6:y:2006:i:1:n:13

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Web page: http://www.degruyter.com

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Cited by:
  1. Decreuse, Bruno, 2003. "Choosy search and the mismatch of talents," MPRA Paper 3636, University Library of Munich, Germany, revised Feb 2007.
  2. Nicolas L. Jacquet & Serene Tan, 2007. "On the Segmentation of Markets," Journal of Political Economy, University of Chicago Press, vol. 115(4), pages 639-664, 08.
  3. Navarro, Lucas, 2011. "Efficiency of two sided investments in an equilibrium unemployment framework," Economic Modelling, Elsevier, vol. 28(3), pages 1090-1098, May.

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