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Simultaneous search and network efficiency

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  • Gautier, Pieter A.
  • Holzner, Christian

Abstract

When workers send applications to vacancies they create a bipartite network. Coordination frictions arise if workers and firms only observe their own links. We show that those frictions and the wage mechanism are in general not independent. Only wage mechanisms that allow for ex post competition generate the maximum matching on a realized network. We show that random search with ex post competition in wages leads to the maximum number of matches and is socially efficient in terms of vacancy creation, worker participation and the number of applications send out, if workers and not firms have the power to make offers.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Munich Reprints in Economics with number 20321.

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Date of creation: 2013
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Publication status: Published in Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Search G04-V1 (2013)
Handle: RePEc:lmu:muenar:20321

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References

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  1. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-94, October.
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Cited by:
  1. Paulina Restrepo-Echavarria & Antonella Tutino & Anton Cheremukhin, 2013. "A Theory of Targeted Search," 2013 Meeting Papers 664, Society for Economic Dynamics.

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