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An Incentive Theory of Matching

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  • Brown, Alessio J. G.
  • Merkl, Christian
  • Snower, Dennis J.

Abstract

This paper examines the labour market matching process by distinguishing its two component stages: the contact stage, in which job searchers make contact with employers and the selection stage, in which they decide whether to match. We construct a theoretical model explaining two-sided selection through microeconomic incentives. Firms face adjustment costs in responding to heterogeneous variations in the characteristics of workers and jobs. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. Our calibrated model for the U.S. can account for important empirical regularities that the conventional matching model cannot. --

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Bibliographic Info

Paper provided by Kiel Institute for the World Economy (IfW) in its series Open Access Publications from Kiel Institute for the World Economy with number 37391.

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Date of creation: 2010
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Handle: RePEc:zbw:ifwkie:37391

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Web page: http://www.ifw-kiel.de/
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Keywords: Matching; incentives; adjustment costs; unemployment; employment; quits; firing; job offers; job acceptance;

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