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Endogenous Matching Functions: An Agent-Based Computational Approach

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Author Info

  • MICHAEL NEUGART

    ()
    (Department of Economics, Chemnitz University of Technology, Reichenhainer Strasse 39, Chemnitz, 09107, Germany)

Abstract

The matching function has become a popular tool in labor economics. It relates job creation (a flow variable) to two stock variables: vacancies and job searchers. In most studies the matching function is considered to be exogenous and assumed to have certain properties. The present study, instead, looks at the properties of an endogenous matching function. For this purpose we have programmed an agent-based computational labor market model with endogenous job creation and endogenous job search behavior. Our~simulations suggest that the endogenous matching technology is subject to decreasing returns to scale. The Beveridge curve reveals substitutability of job searchers and vacancies for a small range of inputs, but is flat for relatively high numbers of job searchers and vertical for relatively high numbers of vacancies. Moreover, the matching technology changes with labor market policies. This raises concerns about the validity of labor market policy evaluations conducted with flow models of the labor market that employ exogenous matching functions.

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Bibliographic Info

Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Advances in Complex Systems.

Volume (Year): 07 (2004)
Issue (Month): 02 ()
Pages: 187-201

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Handle: RePEc:wsi:acsxxx:v:07:y:2004:i:02:p:187-201

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Related research

Keywords: Endogenous matching function; labor market models; agent-based computational model;

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Cited by:
  1. Neugart, Michael, 2008. "Labor market policy evaluation with ACE," Journal of Economic Behavior & Organization, Elsevier, vol. 67(2), pages 418-430, August.
  2. Christian Martin & Michael Neugart, 2009. "Shocks and Endogenous Institutions: An Agent-based Model of Labor Market Performance in Turbulent Times," Computational Economics, Society for Computational Economics, vol. 33(1), pages 31-46, February.
  3. Richard B. Freeman, 2007. "Labor Market Institutions Around the World," NBER Working Papers 13242, National Bureau of Economic Research, Inc.
  4. Neugart, Michael, 2006. "Labor market policy evaluation with an agent-based model," MPRA Paper 4726, University Library of Munich, Germany.
  5. Matteo Richiardi, 2004. "A Search Model Of Unemployment And Firm Dynamics," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 7(02), pages 203-221.
  6. Richard B. Freeman, 2005. "Labour Market Institutions Without Blinders: The Debate over Flexibility and Labour Market Performance," NBER Working Papers 11286, National Bureau of Economic Research, Inc.
  7. Rose, Giuseppe, 2013. "Endogenous ranking in a two-sector urn-ball matching process," Economics Discussion Papers 2013-40, Kiel Institute for the World Economy.
  8. Simon Gemkow & Michael Neugart, 2011. "Referral hiring, endogenous social networks, and inequality: an agent-based analysis," Journal of Evolutionary Economics, Springer, vol. 21(4), pages 703-719, October.

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