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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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Keywords: Matching; incentives; adjustment costs; unemployment; employment; quits; firing; job offers; job acceptance;

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  3. Fahr, René & Sunde, Uwe, 2001. "Disaggregate Matching Functions," IZA Discussion Papers 335, Institute for the Study of Labor (IZA).
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  7. Thomas Lubik & Michael Krause, 2003. "The (Ir)relevance of Real Wage Rigidity in the New Keynesian Model with Search Frictions," Economics Working Paper Archive 504, The Johns Hopkins University,Department of Economics.
  8. Thomas, Carlos, 2008. "Search and matching frictions and optimal monetary policy," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 936-956, July.
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  23. Oliver Jean Blanchard & Peter Diamond, 1989. "The Beveridge Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 1-76.
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  25. Fahr, René & Sunde, Uwe, 2004. "Occupational job creation: Patterns and implications," Munich Reprints in Economics 20488, University of Munich, Department of Economics.
  26. Bentolila, Samuel & Bertola, Giuseppe, 1990. "Firing Costs and Labour Demand: How Bad Is Eurosclerosis?," Review of Economic Studies, Wiley Blackwell, vol. 57(3), pages 381-402, July.
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