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Specialization and efficiency with labor-market matching

  • Mukoyama, Toshihiko
  • Sahin, Aysegül

This paper constructs a labor-market matching model with heterogeneous workers. Due to matching frictions, there may be a mismatch of talents within a production team, forcing a worker to specialize in a task at which she is not talented. We consider a partnership model where production takes place in teams consisting of two workers. We characterize the steady-state of the matching equilibrium. The constrained efficiency of the matching equilibrium depends on the distribution of talents. The constrained-efficient allocation can always be implemented by a type-specific tax. We also examine an alternative model with Diamond-Mortensen-Pissarides type matching between firms and workers.

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Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 33 (2009)
Issue (Month): 1 (January)
Pages: 221-236

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Handle: RePEc:eee:dyncon:v:33:y:2009:i:1:p:221-236
Contact details of provider: Web page: http://www.elsevier.com/locate/jedc

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  1. Toshihiko Mukoyama & Ayşegül Şahin, 2006. "Specialization and Human Capital in Search Equilibrium," Journal of the European Economic Association, MIT Press, vol. 4(2-3), pages 503-512, 04-05.
  2. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits," NBER Working Papers 6038, National Bureau of Economic Research, Inc.
  3. Ricardo Lagos, 2006. "A Model of TFP," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 983-1007.
  4. Michael Sattinger, 2003. "A Search Version of the Roy Model," Discussion Papers 03-08, University at Albany, SUNY, Department of Economics.
  5. Marcus Berliant & Robert R. Reed III & Ping Wang, 2000. "Knowledge Exchange, Matching, and Agglomeration," Vanderbilt University Department of Economics Working Papers 0033, Vanderbilt University Department of Economics.
  6. Shimer Robert & Smith Lones, 2001. "Matching, Search, and Heterogeneity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 1(1), pages 1-18, April.
  7. 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.
  8. Ellen McGrattan & Richard Rogerson & Randall Wright, 1995. "An equilibrium model of the business cycle with household production and fiscal policy," Staff Report 191, Federal Reserve Bank of Minneapolis.
  9. Gabriele Camera & Robert R. Reed & Christopher J. Waller, 2003. "Jack of All Trades or a Master of One? Specialization, Trade, and Money," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(4), pages 1275-1294, November.
  10. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  11. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
  12. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, June.
  13. Acemoglu, Daron, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, MIT Press, vol. 111(3), pages 779-804, August.
  14. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
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