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A Discrete-Time Stochastic Model of Job Matching

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Author Info

  • Anthony E. Smith

    (University of Pennsylvania)

  • Yves Zenou

    (University of Southampton)

Abstract

In this paper, an explicit micro scenario is developed which yields a well-defined aggregate job matching function. In particular, a stochastic model of job-matching behavior is constructed in which the system steady state is shown to be approximated by an exponential-type matching function, as the population becomes large. This steady-state approximation is first derived for fixed levels of both wages and search intensities, where it is shown (without using a free-entry condition) that there exists a unique equilibrium. It is then shown that if job searchers are allowed to choose their search intensities optimally, this model is again consistent with a unique steady state. Finally, the assumption of a fixed wage is relaxed, and an optimal 'offer wage' is derived for employers (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/S1094-2025(02)00007-8
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 6 (2003)
Issue (Month): 1 (January)
Pages: 54-79

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Handle: RePEc:red:issued:v:6:y:2003:i:1:p:54-79

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Related research

Keywords: discrete-time matching function; large population approximation; optimal search intensity; endogeneous wages.;

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References

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  1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  2. Blanchard, O.J. & Diamond, P., 1990. "Ranking, Unemployment Duration, And Wages," Working papers 546, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. HAMILTON, Jonathan & THISSE, Jacques-François & ZENOU, Yves, . "Wage competition with heterogeneous workers and firms," CORE Discussion Papers RP -1463, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  4. Dale T. Mortensen, 1988. "The Persistence and Indeterminacy of Unemployment in Search Equilibrium," Discussion Papers 810, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. Julien, B. & Kennes, J. & King, I., 1998. "Bidding for Labour," Discussion Papers dp98-03, Department of Economics, Simon Fraser University.
  6. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
  7. 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.
  8. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
  9. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932, December.
  10. Smith, Tony E & Zenou, Yves, 2001. "A Discrete-Time Stochastic Model of Job Matching," CEPR Discussion Papers 3044, C.E.P.R. Discussion Papers.
  11. Sattinger, Michael, 1990. "Unemployment, the Market for Interviews, and Wage Employment," Journal of Political Economy, University of Chicago Press, vol. 98(2), pages 356-71, April.
  12. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
  13. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-33, December.
  14. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  15. Burda, Michael & Wyplosz, Charles, 1994. "Gross worker and job flows in Europe," European Economic Review, Elsevier, vol. 38(6), pages 1287-1315, June.
  16. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
  17. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
  18. Hall, Robert E., 1979. "A theory of the natural unemployment rate and the duration of employment," Journal of Monetary Economics, Elsevier, vol. 5(2), pages 153-169, April.
  19. Daron Acemoglu & Robert Shimer, 1998. "Efficient Unemployment Insurance," NBER Working Papers 6686, National Bureau of Economic Research, Inc.
  20. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  21. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-54, September.
  22. Anthony E. Smith & Yves Zenou, 2002. "Online Appendix to "A Discrete-Time Stochastic Model of Job Matching"," Technical Appendices zenou02, Review of Economic Dynamics.
  23. Montgomery, James D, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, MIT Press, vol. 106(1), pages 163-79, February.
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Citations

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Cited by:
  1. Anthony E. Smith & Yves Zenou, 2002. "Online Appendix to "A Discrete-Time Stochastic Model of Job Matching"," Technical Appendices zenou02, Review of Economic Dynamics.
  2. Calvó-Armengol, Antoni & Zenou, Yves, 2001. "Job Matching, Social Network and Word-of-Mouth Communication," CEPR Discussion Papers 2797, C.E.P.R. Discussion Papers.
  3. Neugart, Michael, 2006. "Labor market policy evaluation with an agent-based model," Discussion Papers, Research Unit: Labor Market Policy and Employment SP I 2006-113, Social Science Research Center Berlin (WZB).
  4. Zenou, Yves, 2008. "Job search and mobility in developing countries. Theory and policy implications," Journal of Development Economics, Elsevier, vol. 86(2), pages 336-355, June.
  5. Neugart, Michael, 2008. "Labor market policy evaluation with ACE," Journal of Economic Behavior & Organization, Elsevier, vol. 67(2), pages 418-430, August.
  6. Smith, Tony E. & Zenou, Yves, 2003. "Spatial mismatch, search effort, and urban spatial structure," Journal of Urban Economics, Elsevier, vol. 54(1), pages 129-156, July.
  7. repec:spo:wpecon:info:hdl:2441/8001 is not listed on IDEAS
  8. 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.
  9. Smith, Tony E & Zenou, Yves, 2001. "A Discrete-Time Stochastic Model of Job Matching," CEPR Discussion Papers 3044, C.E.P.R. Discussion Papers.
  10. Matteo Richiardi, 2006. "Toward a Non-Equilibrium Unemployment Theory," Computational Economics, Society for Computational Economics, vol. 28(4), pages 421-446, November.
  11. Sylvain Barde, 2007. "Stable Partial Agglomeration in a New Economic Geography Model with Urban Frictions," Sciences Po publications 07/02, Sciences Po.

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