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Balanced Matching and Labor Market Equilibrium

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  • Burdett, Kenneth
  • Vishwanath, Tara

Abstract

The authors analyze equilibrium in a labor market wherein it takes time for the workers to contact forms. Workers, assumed identical, repeatedly sell their labor services all through their work lives, choosing their search intensity endogenously. Identical firms attempt to maximize their steady-state profit flow. The authors focus on the importance and consequences of balanced matching, in which workers are more likely to contact a larger firm. A unique equilibrium is shown to exist wherein all firms offer the same wage and select an employment level at which wage equals marginal product. The effect of traditional labor market policies and empirical implications are discussed. Copyright 1988 by University of Chicago Press.

Suggested Citation

  • Burdett, Kenneth & Vishwanath, Tara, 1988. "Balanced Matching and Labor Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 1048-1065, October.
  • Handle: RePEc:ucp:jpolec:v:96:y:1988:i:5:p:1048-65
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    References listed on IDEAS

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    1. Paul Krugman, 1986. "Strategic Trade Policy and the New International Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610450, January.
    2. R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
    3. Oswald, Andrew J, 1982. "Trade Unions, Wages and Unemployment: What Can Simple Models Tell Us?," Oxford Economic Papers, Oxford University Press, vol. 34(3), pages 526-545, November.
    4. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, pages 896-908.
    5. Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977. "Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods," American Economic Review, American Economic Association, pages 823-839.
    6. Diewert, W E, 1974. "The Effects of Unionization on Wages and Employment: A General Equilibrium Analysis," Economic Inquiry, Western Economic Association International, vol. 12(3), pages 319-339, September.
    7. Freeman, Richard B & Medoff, James L, 1982. "Substitution between Production Labor and Other Inputs in Unionized and Nonunionized Manufacturing," The Review of Economics and Statistics, MIT Press, pages 220-233.
    8. Freeman, Richard B & Medoff, James L, 1981. "The Impact of the Percentage Organized on Union and Nonunion Wages," The Review of Economics and Statistics, MIT Press, pages 561-572.
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    Citations

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    Cited by:

    1. University of Minnesota & Erzo G.J. Luttmer, 2007. "New Goods and the Size Distribution of Firms," 2007 Meeting Papers 266, Society for Economic Dynamics.
    2. Burdett, Kenneth, 1989. "Empirical Wage Distributions: A New Framework for Labor Market Policy Analysis," Working Paper Series 223, Research Institute of Industrial Economics.
    3. Claudio Michelacci & Vincenzo Quadrini, 2009. "Financial Markets and Wages," Review of Economic Studies, Oxford University Press, pages 795-827.
    4. Subal Kumbhakar & Christopher Parmeter, 2009. "The effects of match uncertainty and bargaining on labor market outcomes: evidence from firm and worker specific estimates," Journal of Productivity Analysis, Springer, pages 1-14.
    5. J. Ignacio Garcia-Perez, 2002. "Equilibrium search models: the role of the assumptions," Investigaciones Economicas, Fundación SEPI, vol. 26(2), pages 255-284, May.
    6. van den Berg, Gerard J. & van Vuuren, Aico, 2010. "The effect of search frictions on wages," Labour Economics, Elsevier, pages 875-885.
    7. Luigi Paciello & Andrea Pozzi & Nicholas Trachter, 2013. "Price Dynamics with Customer Markets," EIEF Working Papers Series 1328, Einaudi Institute for Economics and Finance (EIEF), revised Dec 2017.
    8. Barth, Erling & Dale-Olsen, Harald, 2009. "Monopsonistic discrimination, worker turnover, and the gender wage gap," Labour Economics, Elsevier, pages 589-597.
    9. Erzo G. J. Luttmer, 2010. "Models of Growth and Firm Heterogeneity," Working Papers 2010-1, University of Minnesota, Department of Economics.
    10. Rebien, Martina & Stops, Michael & Zaharieva, Anna, 2017. "Formal search and referrals from a firm's perspective," IAB Discussion Paper 201733, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    11. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium Wage Dispersion with Worker and Employer Heterogeneity," Econometrica, Econometric Society, pages 2295-2350.
    12. Garloff, Alfred, 2003. "Lohndispersion und Arbeitslosigkeit: Neuere Ansätze in der Suchtheorie," ZEW Discussion Papers 03-60, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    13. Erling Barth & Harald Dale-Olsen, 2011. "Employer Size or Skill Group Size Effect on Wages?," ILR Review, Cornell University, ILR School, pages 341-355.
    14. Rebien, Martina & Stops, Michael & Zaharieva, Anna, 2017. "Formal search and referrals from a firm's perspective," Center for Mathematical Economics Working Papers 578, Center for Mathematical Economics, Bielefeld University.
    15. Erzo G. J. Luttmer, 2006. "Consumer search and firm growth," Working Papers 645, Federal Reserve Bank of Minneapolis.
    16. Erzo G.J. Luttmer, 2010. "Models of Growth and Firm Heterogeneity," Annual Review of Economics, Annual Reviews, pages 547-576.
    17. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    18. Barth, Erling & Dale-Olsen, Harald, 2009. "Monopsonistic discrimination, worker turnover, and the gender wage gap," Labour Economics, Elsevier, pages 589-597.
    19. Prokop, Jacek, 1992. "Duration of debt overhang with two lender banks," Economics Letters, Elsevier, pages 473-478.
    20. Berg, Gerard J. van den & Vuuren, Aico van, 2000. "Using firm data to assess the performance of equilibrium search models of the labor market," Serie Research Memoranda 0023, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.

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