Complementarities and Substitutabilities in Matching Models
AbstractIn a standard search and matching model the labor market presents frictions while in the competitive product market the demand is infinitely elastic. To have a more realistic framework, some macroeconomic models abandon the assumption of infinite elasticity and consider a two-tier productive scheme in the goods market. In this paper, it is shown that, under some reasonable assumptions about the final goods production function (for instance Cobb-Douglas technology) the unique equilibrium of this kind of model features no production and full unemployment, making them useless for any policy analysis. A comparison between the two frameworks shows that a standard matching model overestimates the impact in terms of employment of any policy intervention in the sector where such a policy has been promoted, while at the same time it ignores the effects that emerge in other sectors of the economy.
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Bibliographic InfoArticle provided by Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore in its journal Rivista Internazionale di Scienze Sociali.
Volume (Year): 116 (2008)
Issue (Month): 2 ()
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Unemployment; search-matching equilibrium; labor market programs;
Other versions of this item:
- Gabriele, CARDULLO, 2006. "Complementarities and substitutabilities in matching models," Discussion Papers (ECON - DÃ©partement des Sciences Economiques) 2006001, Université catholique de Louvain, Département des Sciences Economiques.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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