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Directed search, unemployment and public policy

Author

Listed:
  • Benoît Julien
  • John Kennes
  • Ian King
  • Sephorah Mangin

Abstract

We examine the effects of public policy parameters in a simple directed search model of the labour market, and contrast them with those in standard random matching models with Nash bargaining. Both finite and limit versions of the directed search model are considered, and the value of the limit model as an approximation of the finite one is assessed. As with the random matching model, job creation is the key channel through which the policy parameters affect the equilibrium of the directed search model. Both comparative static effects of the policy parameters and optimal configurations are identified. On examine les effets des paramètres de la politique publique dans un modèle simple de recherche dirigée d’emploi sur le marché du travail, et on les contraste avec ceux qu’on obtient par des modèles d’appariements aléatoires avec marchandage à la Nash. A la fois les versions finie et limite du modèle de recherche dirigée sont examinées, et la valeur du modèle limite en tant qu’approximation de la version finie est évaluée. Comme dans le modèle d’appariement aléatoire, la création d’emploi est le canal principal à travers lequel les paramètres de la politique affectent l’équilibre du marché du travail. On identifie les effets de statique comparative des paramètres de la politique ainsi que les configurations optimales.

Suggested Citation

  • Benoît Julien & John Kennes & Ian King & Sephorah Mangin, 2009. "Directed search, unemployment and public policy," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 956-983, August.
  • Handle: RePEc:wly:canjec:v:42:y:2009:i:3:p:956-983
    DOI: 10.1111/j.1540-5982.2009.01534.x
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    References listed on IDEAS

    as
    1. Julien, Benoit & Kennes, John & King, Ian, 2006. "The Mortensen rule and efficient coordination unemployment," Economics Letters, Elsevier, vol. 90(2), pages 149-155, February.
    2. James Albrecht & Pieter A. Gautier & Susan Vroman, 2006. "Equilibrium Directed Search with Multiple Applications," Review of Economic Studies, Oxford University Press, vol. 73(4), pages 869-891.
    3. Mathias Hungerbühler & Etienne Lehmann & Alexis Parmentier & Bruno Van Der Linden, 2006. "Optimal Redistributive Taxation in a Search Equilibrium Model," Review of Economic Studies, Oxford University Press, vol. 73(3), pages 743-767.
    4. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
    5. Etienne Lehmann & Bruno Van Der Linden, 2007. "On the Optimality of Search Matching Equilibrium When Workers Are Risk Averse," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 9(5), pages 867-884, October.
    6. Boone, Jan & Bovenberg, Lans, 2002. "Optimal labour taxation and search," Journal of Public Economics, Elsevier, vol. 85(1), pages 53-97, July.
    7. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    8. Julien, Benoit & Kennes, John & King, Ian, 2000. "Matching Foundations," Working Papers 189, Department of Economics, The University of Auckland.
    9. Benoit Julien & John Kennes & Ian King, 2006. "Residual Wage Disparity And Coordination Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 961-989, August.
    10. Benoît Julien & John Kennes & Ian King, 2005. "Ex post bidding and efficient coordination unemployment," Canadian Journal of Economics, Canadian Economics Association, vol. 38(1), pages 174-193, February.
    11. Benoit Julien & John Kennes & Ian King, 2000. "Bidding for Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October.
    12. McAfee, R Preston, 1993. "Mechanism Design by Competing Sellers," Econometrica, Econometric Society, vol. 61(6), pages 1281-1312, November.
    13. Christopher A. Pissarides, 1985. "Taxes, Subsidies and Equilibrium Unemployment," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 121-133.
    14. James D. Montgomery, 1991. "Equilibrium Wage Dispersion and Interindustry Wage Differentials," The Quarterly Journal of Economics, Oxford University Press, vol. 106(1), pages 163-179.
    15. Ian King, 2003. "A directed tour of search-theoretic explanations for unemployment," New Zealand Economic Papers, Taylor & Francis Journals, vol. 37(2), pages 245-267.
    16. 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.
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    Citations

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    Cited by:

    1. Jian Xin Heng & Benoit Julien & John Kennes & Ian King, 2016. "Job Qualities, Search Unemployment, and Public Policy," Discussion Papers Series 570, School of Economics, University of Queensland, Australia.
    2. Merkl, Christian & Stüber, Heiko, 2016. "Wage cyclicalities and labor market dynamics at the establishment level: Theory and evidence," FAU Discussion Papers in Economics 12/2016, Friedrich-Alexander University Erlangen-Nuremberg, Institute for Economics.
    3. Athanasios Geromichalos, 2015. "Unemployment Insurance and Optimal Taxation in a Search Model of the Labor Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(2), pages 365-380, April.
    4. Ian King & Frank Stähler, 2014. "International trade and directed search unemployment in general equilibrium," Canadian Journal of Economics, Canadian Economics Association, vol. 47(2), pages 580-604, May.
    5. Ian King & Frank Stähler, 2018. "Capital Utilization and Search Unemployment in Dynamic General Equilibrium," Discussion Papers Series 598, School of Economics, University of Queensland, Australia.
    6. Guerrieri, Veronica & Julien, Benoit & Kircher, Philipp & Wright, Randall, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    7. John Kennes & Daniel le Maire, 2013. "Job Heterogeneity and Coordination Frictions," Economics Working Papers 2013-09, Department of Economics and Business Economics, Aarhus University.

    More about this item

    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
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • 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
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions

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