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Coordination, matching, and wages

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Author Info
Melanie Cao
Shouyong Shi

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Abstract

We analyse the coordination problem in the labour market by endogenizing the matching function and the wage share. Each firm posts a wage to maximize the expected profit, anticipating how the wage affects the expected number of applicants. In equilibrium workers apply to firms with mixed strategies, which generate coordination failure and persistent unemployment. We show how the wage share, unemployment, and the welfare loss from the coordination failure depend on the market tightness and the market size. The welfare loss from the coordination failure is as high as 7.5 per cent of potential output.

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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 33 (2000)
Issue (Month): 4 (November)
Pages: 1009-1033
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Handle: RePEc:cje:issued:v:33:y:2000:i:4:p:1009-1033

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Related research
Keywords:

Find related papers by JEL classification:
C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search

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. Gabriele R. & Fagiolo G. & Dosi G., 2004. "Towards an Evolutionary Interpretation of Aggregate Labor Market Regularities," Computing in Economics and Finance 2004 84, Society for Computational Economics. [Downloadable!]
    Other versions:
  2. John Kennes, 2004. "Competitive Auctions: Theory and Application," CAM Working Papers 2004-17, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
    Other versions:
  3. Taub, Bart, 2001. "Filtering with Search," Discussion Paper Series 26256, Hamburg Institute of International Economics. [Downloadable!]
  4. Neugart, Michael, 2006. "Labor market policy evaluation with an agent-based model," MPRA Paper 4726, University Library of Munich, Germany. [Downloadable!]
  5. Benoit Julien & John Kennes & Ian King, 2001. "Residual Wage Disparity and Coordination Unemployment," CAM Working Papers 2004-20, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics, revised Nov 2004. [Downloadable!]
    Other versions:
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This page was last updated on 2009-11-25.

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