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Island matching

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  • Mortensen, Dale T.

Abstract

A plausible micro foundation for the matching function, postulated in models of equilibrium unemployment, is proposed. The flow of matches formed is an increasing and concave function of the number of jobs and workers to be matched holding the other constant, but exhibits increasing to scale. Nevertheless, the function is consistent with the observed Beveridge curve and the log linear relationship between the job finding rate and the vacancy-unemployment ratio. Although a market equilibrium in which wages are determined by ex post auctions is not constrained efficient, a modified auction exists that decentralizes the solution to the social planner's problem.

Suggested Citation

  • Mortensen, Dale T., 2009. "Island matching," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2336-2353, November.
  • Handle: RePEc:eee:jetheo:v:144:y:2009:i:6:p:2336-2353
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    2. Marcus Hagedorn & Iourii Manovskii, 2008. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies Revisited," American Economic Review, American Economic Association, vol. 98(4), pages 1692-1706, September.
    3. Dale Mortensen & Eva Nagypal, 2007. "More on Unemployment and Vacancy Fluctuations," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 10(3), pages 327-347, July.
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    5. Diamond, Peter & Fudenberg, Drew, 1989. "Rational Expectations Business Cycles in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 97(3), pages 606-619, June.
    6. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June.
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    9. Dale T. Mortensen & Randall Wright, 2002. "Competitive Pricing and Efficiency in Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 1-20, February.
    10. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-979, December.
    11. Robert Shimer, 2005. "The Cyclical Behavior of Equilibrium Unemployment and Vacancies," American Economic Review, American Economic Association, vol. 95(1), pages 25-49, March.
    12. Mortensen, Dale T, 1999. "Equilibrium Unemployment Dynamics," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 889-914, November.
    13. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
    14. Lucas, Robert Jr. & Prescott, Edward C., 1974. "Equilibrium search and unemployment," Journal of Economic Theory, Elsevier, vol. 7(2), pages 188-209, February.
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    Cited by:

    1. Vives Coscojuela, Cecilia, 2016. "Human Capital and Market Size," IKERLANAK Ikerlanak;2016-98, Universidad del País Vasco - Departamento de Fundamentos del Análisis Económico I.
    2. Ludo Visschers & Carlos Carrillo-Tudela, 2011. "Unemployment and Endogenous Reallocation over the Business Cycle," 2011 Meeting Papers 1101, Society for Economic Dynamics.
    3. Carlos Usabiaga & Pablo Álvarez de Toledo & Fernando Núñez, 2013. "Labour Market Segmentation, Clusters, Mobility And Unemployment Duration With Individual Microdata," EcoMod2013 5688, EcoMod.
    4. Carlos Usabiaga & Fernando Núñez & Pablo Álvarez de Toledo, 2013. "Segmentación del mercado de trabajo, clusters, movilidad y duración de desempleo con datos individuales," Economic Working Papers at Centro de Estudios Andaluces E2013/02, Centro de Estudios Andaluces.
    5. Álvarez de Toledo, Pablo & Núñez, Fernando & Usabiaga, Carlos, 2014. "An empirical approach on labour segmentation. Applications with individual duration data," Economic Modelling, Elsevier, vol. 36(C), pages 252-267.
    6. Simonetta Longhi, 2012. "Job Competition and the Wage Curve," Regional Studies, Taylor & Francis Journals, vol. 46(5), pages 611-620, August.
    7. Kaas Leo, 2010. "Variable Search Intensity with Coordination Unemployment," The B.E. Journal of Macroeconomics, De Gruyter, vol. 10(1), pages 1-33, October.
    8. Kaas, Leo, 2008. "Variable Search Intensity in an Economy with Coordination Unemployment," IZA Discussion Papers 3697, Institute for the Study of Labor (IZA).
    9. Moritz Ritter & John Kennes & Benoit Julien, 2013. "Bidding for Teams," 2013 Meeting Papers 989, Society for Economic Dynamics.
    10. Bauer, Anja, 2013. "Mismatch unemployment : evidence from Germany 2000-2010," IAB Discussion Paper 201310, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Benoit Julien & John Kennes & Moritz Ritter, 2013. "Bidding for Clubs," Economics Working Papers 2013-19, Department of Economics and Business Economics, Aarhus University.
    12. Claudio Michelacci & Josep Pijoan-Mas, 2012. "Intertemporal Labour Supply with Search Frictions," Review of Economic Studies, Oxford University Press, vol. 79(3), pages 899-931.
    13. Guido Menzio & Randall Wright, 2016. "Introduction to the Special Issue in Honor of Dale Mortensen," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 19, pages 1-3, January.
    14. Ohanian, Lee E. & Prescott, Edward C. & Stokey, Nancy L., 2009. "Introduction to dynamic general equilibrium," Journal of Economic Theory, Elsevier, vol. 144(6), pages 2235-2246, November.

    More about this item

    Keywords

    Matching function Beveridge curve Constrained efficiency Equilibrium unemployment;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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