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Double-Holdups in a Matching Model with Search Frictions and Endogenous Heterogeneity

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  • Lucas Navarro

Abstract

This paper investigates the interaction between education decisions by workers and investment decisions by firms in a random matching model with endogenous heterogeneity. I analyze the efficiency properties of the equilibrium and find that in the presence of search frictions and investment costs in both human and physical capital, while workers under-invest in education firms may efficiently invest in high-skill jobs. I find that due to a technological externality, under-investments by workers alleviate the holdup problem faced by firms. Moreover, I show that there is a combination of human and physical capital costs that solves the firms' holdup problem

Suggested Citation

  • Lucas Navarro, 2004. "Double-Holdups in a Matching Model with Search Frictions and Endogenous Heterogeneity," Econometric Society 2004 Latin American Meetings 181, Econometric Society.
    • Handle: RePEc:ecm:latm04:181
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    More about this item

    Keywords

    matching; search frictions; ex-post bargaining; endogenous heterogeneity; efficiency;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • 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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