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Complementarities and Substitutabilities in Matching Models

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Listed author(s):
  • Gabriele Cardullo

    ()

    (Facolta' di Economia, Universita' degli Studi di Genova)

Abstract

In a standard search and matching model the labor market presents frictions while in the competitive product market the demand is infinitely elastic. To have a more realistic framework, some macroeconomic models abandon the assumption of infinite elasticity and consider a two-tier productive scheme in the goods market. In this paper, it is shown that, under some reasonable assumptions about the final goods production function (for instance Cobb-Douglas technology) the unique equilibrium of this kind of model features no production and full unemployment, making them useless for any policy analysis. A comparison between the two frameworks shows that a standard matching model overestimates the impact in terms of employment of any policy intervention in the sector where such a policy has been promoted, while at the same time it ignores the effects that emerge in other sectors of the economy.

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Article provided by Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore in its journal Rivista Internazionale di Scienze Sociali.

Volume (Year): 116 (2008)
Issue (Month): 2 ()
Pages: 159-177

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Handle: RePEc:vep:journl:y:2008:v:116:i:2:p:159-177
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Keywords: Unemployment; search-matching equilibrium; labor market programs;

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Find related papers by 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
  • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
  • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
  • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
  • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

References listed on IDEAS
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  1. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
  2. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627 Elsevier.
  3. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  4. Pierre Cahuc & André Zylberberg, 2004. "Labor Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 026203316x, July.
  5. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-132, March.
  6. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
  7. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Oxford University Press, vol. 49(2), pages 217-227.
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Cited by:

  1. Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
  2. Batyra, Anna & Sneessens, Henri R., 2010. "Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance," Journal of Policy Modeling, Elsevier, vol. 32(4), pages 531-543, July.

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