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On-the-Job Search and Sorting

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  • Pieter A. Gautier

    ()
    (VU University Amsterdam)

  • Coen N. Teulings

    ()
    (SEO Economic Research, University of Amsterdam)

  • Aico van Vuuren

    ()
    (VU University Amsterdam)

Abstract

This paper characterizes the equilibrium for a large class of search models with two-sided heterogeneity and on-the-job search. Besides the well-known congestion externalities, we show that on-the-job search in combination with monopsonistic wage setting without commitment creates a "business-stealing" externality. In the absence of congestion effects, this leads to excessive vacancy creation. Under wage setting with commitment this externality is absent because when posting a wage, firms take into account the expected productivity of future workers in their current jobs. If firms are able to make and respond to counteroffers, then they will not have to pay no-quit premia and this also leads to excessive vacancy creation. See also 'On-The-Job Search, Mismatch and Efficiency' , 'Review of Economic Studies', 77(1), 245-72.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 05-070/3.

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Date of creation: 24 Jun 2005
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Handle: RePEc:dgr:uvatin:20050070

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Web page: http://www.tinbergen.nl

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Keywords: assignment; on-the job search; wage bargaining; sorting;

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References

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  1. Barlevy, Gadi, 2002. "The Sullying Effect of Recessions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 69(1), pages 65-96, January.
  2. Moscarini, Giuseppe, 2001. "Excess Worker Reallocation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 68(3), pages 593-612, July.
  3. Jovanovic, Boyan, 1984. "Matching, Turnover, and Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 92(1), pages 108-22, February.
  4. Ariel Rubinstein, 2010. "Perfect Equilibrium in a Bargaining Model," Levine's Working Paper Archive 252, David K. Levine.
  5. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. mismatch of talents: Reconsidering unemployment benefits," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 211, Department of Economics and Business, Universitat Pompeu Fabra.
  6. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, Elsevier, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  7. Postel-Vinay, Fabien & Robin, Jean-Marc, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3548, C.E.P.R. Discussion Papers.
  8. Gautier, Pieter A, 2002. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Workers," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 69(273), pages 21-40, February.
  9. Pieter Gautier & Coen Teulings, 2005. "How Large are Search Frictions," 2005 Meeting Papers, Society for Economic Dynamics 175, Society for Economic Dynamics.
  10. Coen N. Teulings & Pieter A. Gautier, 2004. "The Right Man for the Job," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71(2), pages 553-580, 04.
  11. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  12. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers, Centre for Economic Performance, LSE dp0074, Centre for Economic Performance, LSE.
  13. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
  14. Giuseppe Moscarini, 2005. "Job Matching and the Wage Distribution," Econometrica, Econometric Society, Econometric Society, vol. 73(2), pages 481-516, 03.
  15. Marimon, R. & Zilibotti, F., 1998. "Unemployment vs. Mismatch of Talents," Papers, Stockholm - International Economic Studies 661, Stockholm - International Economic Studies.
  16. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers, Northwestern University, Center for Mathematical Studies in Economics and Management Science 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  17. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, American Economic Association, vol. 74(3), pages 433-44, June.
  18. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, Elsevier, vol. 50(4), pages 811-830, May.
  19. Jovanovic, Boyan, 1979. "Job Matching and the Theory of Turnover," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages 972-90, October.
  20. Moen, Espen R. & Rosén, Åsa, 2002. "Does poaching distort training?," Working Paper Series, Swedish Institute for Social Research 4/2002, Swedish Institute for Social Research.
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Citations

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Cited by:
  1. Pieter A. Gautier & Coen N. Teulings, 2003. "How Large are Search Frictions?," Tinbergen Institute Discussion Papers, Tinbergen Institute 03-026/3, Tinbergen Institute, revised 22 Aug 2005.
  2. Gautier, Pieter A & Zenou, Yves, 2008. "Car Ownership and the Labour Market of Ethnic Minorities," CEPR Discussion Papers, C.E.P.R. Discussion Papers 7061, C.E.P.R. Discussion Papers.
  3. Gautier, P.A. & Teulings, C.N., 2009. "Search and the city," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(3), pages 251-265, May.
  4. Gautier, Pieter A & Teulings, Coen N, 2011. "Sorting and the output loss due to search frictions," CEPR Discussion Papers, C.E.P.R. Discussion Papers 8257, C.E.P.R. Discussion Papers.
  5. Gadi Barlevy & H. N. Nagaraja, 2010. "Estimating Mobility Rates in Search Models with Initial Condition Problems," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 13(4), pages 780-799, October.
  6. Gadi Barlevy & H. N. Nagaraja, 2006. "Identification of Search Models with Initial Condition Problems," 2006 Meeting Papers, Society for Economic Dynamics 4, Society for Economic Dynamics.
  7. Yale University & Rafael Lopes de Melo, 2008. "Assortative Matching in the Brazilian Labor Market," 2008 Meeting Papers 801, Society for Economic Dynamics.

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