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On the Inefficiency of Matching Models of Unemployment with Heterogeneous Workers and Jobs when Firms Rank their Applicants

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Author Info

  • Frédéric Gavrel

    (University of Caen Basse-Normandie, France - CREM-CNRS)

Abstract

In a circular matching model, firms rank their applicants and pick the best suited one. Job creation appears to lower the average output. As firms do not internalize this effect, jobs are too many in the laissez-faire equilibrium under the Hosios condition. Due to similar externalities firms' search intensities are too strong whereas workers' search intensities are too weak.

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Bibliographic Info

Paper provided by Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS in its series Economics Working Paper Archive (University of Rennes 1 & University of Caen) with number 201107.

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Date of creation: Feb 2011
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Handle: RePEc:tut:cremwp:201107

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Postal: CREM (UMR CNRS 6211) – Faculty of Economics, 7 place Hoche, 35065 RENNES Cedex
Phone: 02 23 23 35 47
Fax: (33) 2 23 23 35 99
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Web page: http://crem.univ-rennes1.fr/
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Postal: CREM (UMR CNRS 6211) - Faculty of Economics, 7 place Hoche, 35065 Rennes Cedex - France
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Keywords: Matching; Differentiation of skills; Applicant ranking; Labor market; efficiency;

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References

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  1. Daron Acemoglu, 1998. "Changes in Unemployment and Wage Inequality: An Alternative Theory and Some Evidence," NBER Working Papers 6658, National Bureau of Economic Research, Inc.
  2. 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.
  3. Layard, R. & Nickell, S., 1991. "Unemployment in the OECD Countries," Economics Series Working Papers 99130, University of Oxford, Department of Economics.
  4. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers dp0074, Centre for Economic Performance, LSE.
  5. Dolado, Juan J. & Jansen, Marcel & Jimeno, Juan F., 2003. "On-the-Job Search in a Matching Model with Heterogenous Jobs and Workers," IZA Discussion Papers 886, Institute for the Study of Labor (IZA).
  6. James Albrecht, Pieter Gautier, & Susan Vroman, 2003. "Matching with Multiple Applications: The Limiting Case," Working Papers gueconwpa~03-03-25, Georgetown University, Department of Economics.
  7. Ching-to Albert Ma & Andrew M. Weiss, 1990. "A Signaling Theory of Unemployment," NBER Working Papers 3565, National Bureau of Economic Research, Inc.
  8. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 105(2), pages 385-411, April.
  9. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," Papers 1997-25, Uppsala - Working Paper Series.
  10. Pieter Gautier & Coen Teulings, 2005. "How Large are Search Frictions," 2005 Meeting Papers 175, Society for Economic Dynamics.
  11. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "Efficiency in a Search and Matching Model with Endogenous Participation," ILADES-Georgetown University Working Papers inv218, Ilades-Georgetown University, Universidad Alberto Hurtado/School of Economics and Bussines.
  12. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
  13. repec:bla:restud:v:77:y:2010:i:1:p:245-272 is not listed on IDEAS
  14. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
  15. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
  16. Pieter A. Gautier, 1999. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Heterogeneous Workers," Tinbergen Institute Discussion Papers 99-075/3, Tinbergen Institute.
  17. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  18. James W. Albrecht & Pieter A. Gautier & Susan B. Vroman, 2001. "Matching with Multiple Applications," Tinbergen Institute Discussion Papers 01-080/3, Tinbergen Institute.
  19. Pieter A. Gautier, 2001. "The Right Man for the Job," CESifo Working Paper Series 540, CESifo Group Munich.
  20. Moen, Espen R, 1999. "Education, Ranking, and Competition for Jobs," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages 694-723, October.
  21. Kennes, John, 2006. "Underemployment, on-the-job search, and the Beveridge curve," Economics Letters, Elsevier, vol. 91(2), pages 167-172, May.
  22. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
  23. 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.
  24. Gautier, Pieter A, 2002. "Unemployment and Search Externalities in a Model with Heterogeneous Jobs and Workers," Economica, London School of Economics and Political Science, vol. 69(273), pages 21-40, February.
  25. Mortensen, Dale T & Pissarides, Christopher A, 1999. "Unemployment Responses to 'Skill-Biased' Technology Shocks: The Role of Labour Market Policy," Economic Journal, Royal Economic Society, vol. 109(455), pages 242-65, April.
  26. Gavrel, Frédéric, 2009. "Technical skill bias as a response of firms to unemployment: A matching model with applicant ranking and endogenous skill requirements," Labour Economics, Elsevier, vol. 16(3), pages 304-310, June.
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Citations

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Cited by:
  1. 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.
  2. Frederic Gavrel, 2014. "Participation, Recruitment Selection, and the Minimum Wage," TEPP Working Paper 2014-02, TEPP.
  3. Gavrel, Frédéric, 2012. "On the inefficiency of matching models of unemployment with heterogeneous workers and jobs when firms rank their applicants," European Economic Review, Elsevier, vol. 56(8), pages 1746-1758.

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