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Efficiency in a Search and Matching Model with Endogenous Participation

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We show that in a search/matching model with endogenous participation in which workers are heterogeneous with respect to market productivity, satisfying the Hosios rule leads to excessive vacancy creation. The reason is that the marginal worker does not internalize the effect of his or her participation on average productivity.

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Bibliographic Info

Paper provided by Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines in its series ILADES-Georgetown University Working Papers with number inv218.

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Length: 5 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:ila:ilades:inv218

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Keywords: search; matching; participation; Hosios rule; efficiency;

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References

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  1. James Albrecht & Lucas Navarro & Susan Vroman, 2006. "The Effects of Labor Market Policies in an Economy with an Informal Sector," Working Papers gueconwpa~06-06-06, Georgetown University, Department of Economics.
  2. 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.
  3. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
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Cited by:
  1. Hairault, Jean-Olivier & Langot, François & Zylberberg, Andre, 2012. "Equilibrium Unemployment and Retirement," IZA Discussion Papers 6511, Institute for the Study of Labor (IZA).
  2. Engelhardt, Bryan & Fuller, David L., 2012. "Labor force participation and pair-wise efficient contracts with search and bargaining," Labour Economics, Elsevier, vol. 19(3), pages 388-402.
  3. Frédéric Gavrel, 2011. "Is the Formal Sector too Large or too Small? A Reexamination of Minimum Wages in Developing Countries," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201108, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  4. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
  5. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2008. "Age-Dependent Employment Protection," IZA Discussion Papers 3851, Institute for the Study of Labor (IZA).
  6. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Efficiency in a search and matching economy with a competitive informal sector," Economics Letters, Elsevier, vol. 118(1), pages 192-194.
  7. Cristian Aedo & Ian Walker, 2012. "Skills for the 21st Century in Latin America and the Caribbean," World Bank Publications, The World Bank, number 2236, January.
  8. Chéron, Arnaud & Hairault, Jean-Olivier & Langot, François, 2011. "Life Cycle Equilibrium Unemployment," CEPREMAP Working Papers (Docweb) 1103, CEPREMAP.
  9. Frédéric Gavrel, 2011. "On the Inefficiency of Matching Models of Unemployment with Heterogeneous Workers and Jobs when Firms Rank their Applicants," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201107, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
  10. Etienne LEHMANN & Paola L. MONTERO LEDEZMA & Bruno VAN DER LINDEN, 2013. "Inefficient equilibrium unemployment in a duocentric economy with matching frictions," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2013033, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  11. Frédéric Gavrel, 2014. "Participation, Recruitment Selection, and the Minimum Wage," Working Papers halshs-00948453, HAL.

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