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Efficiency of Investment in Human and Physical Capital in a Model of Bilateral Search and Bargaining Author info | Abstract | Publisher info | Download info | Related research | Statistics Masters, Adrian M
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A matching model is used to analyze the effect of search frictions on incentives to invest in human and physical capital. Equilibrium involves inefficient (low) levels of investment. The source of the inefficiency cannot be attributed solely to either search or bargaining. Schemes that assist matching are Pareto-improving. While the ratio of workers to firms remains fixed, intermediaries that pay owners according to the amount of capital carried into the market are able to generate efficient outcomes. Such intervention may not eliminate inefficiencies when the ratio is endogenized. Policy implications include encouragement of investment (even while abstracting from growth). Copyright 1998 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review .
Volume (Year): 39 (1998)
Issue (Month): 2 (May)
Pages: 477-94
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Handle: RePEc:ier:iecrev:v:39:y:1998:i:2:p:477-94Contact details of provider: Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297 Phone: (215) 898-8487 Fax: (215) 573-2057 Email: Web page: http://www.econ.upenn.edu/ier More information through EDIRC
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