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Frictional Assignment

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Abstract

This paper examines the time-consuming process of matching the two sides of a market each having diverse characteristics. This is cast in a labor market setting where workers of different skills need be matched with different machine qualities to produce output. I characterize the efficient allocation and then show that it can be decentralized by a competitive framework. A prominent feature of the frictional assignment is that each skill level is associated with a market tightness in addition to a machine quality. The differential market tightness as an additional allocative device implies that the assignment is not always positively assortative, i.e., high quality machines are not necessarily assigned to high skills even though machine qualities and skills are complementary in production. The market mechanism that decentralizes the efficient assignment has the feature that firms post wages to attract workers in addition to choosing machine qualities. A steady state is established and numerical exercices are used to show that the differential market tightness for different skills is also quantitatively important for the wage function and wage distribution. Ce papier étudie le processus coûteux en temps d'appariement des deux côtés du marché, chacun ayant des caractéristiques diverses. Ceci est placé dans un marché du travail où les travailleurs ont des qualifications qui doivent être appariées avec différents qualités de machine pour la production. Je caractérise l'allocation efficace puis montre qu'elle peut être décentralisée dans un cadre concurrentiel. Un trait saillant de l'assignation frictionnelle est que chaque niveau de qualification est associé à un degré d'étroitesse du marché en plus d'une qualité de machine. L'étroitesse du marché différenciée en tant qu'instrument supplémentaire d'allocation implique que l'assignation n'est pas toujours positivement assortative, par exemple que des machines de haute qualité ne sont pas nécessairement assignées à des travailleurs hautement qualifiés malgré que qualité et qualification soient complémentaires dans la production. Le mécanisme de marché qui décentralise l'assignation efficace a la particularité que la firme affiche des salaires qui attirent des travailleurs en plus de choisir les qualités de machine. Un état stationnaire est établi et des exercices numériques sont utilisés pour montrer que le différentiel d'étroitesse du marché pour les différentes qualifications est également quantitativement important pour la fonction de salaire et la distribution des salaires.

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Bibliographic Info

Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 74.

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Length: 41 pages
Date of creation: Nov 1998
Date of revision:
Handle: RePEc:cre:crefwp:74

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Keywords: Frictional matching; Market tightness; Skills; Machines; Wage distribution;

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References

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  1. Boyan Jovanovic, 1998. "Vintage Capital and Inequality," NBER Working Papers 6416, National Bureau of Economic Research, Inc.
  2. repec:fth:starer:9816 is not listed on IDEAS
  3. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  4. 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.
  5. Julien, B. & Kennes, J. & King, I., 1998. "Bidding for Labour," Discussion Papers dp98-03, Department of Economics, Simon Fraser University.
  6. Jovanovic, B., 1998. "Vintage Capital and Equality," Working Papers 98-16, C.V. Starr Center for Applied Economics, New York University.
  7. Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May.
  8. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December.
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