IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Investments in education and welfare in a two-sector, random matching economy

We consider a random matching model where heterogeneous agents choose optimally to invest time and real resources in education. Generically, there is a steady state equilibrium, where some agents, but not all of them, invest. Regular steady state equilibria are constrained inefficient in a strong sense. The Hosios (1990) condition is neither necessary, nor sufficient, for constrained efficiency. We also provide restrictions on the fundamentals sufficient to guarantee that equilibria are characterized by overeducation (or undereducation), present some results on their comparative statics properties, and discuss the nature of welfare improving policies.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Dipartimento Scienze Economiche, Universita' di Bologna in its series Working Papers with number 702.

in new window

Date of creation: May 2010
Date of revision:
Handle: RePEc:bol:bodewp:702
Contact details of provider: Postal: Piazza Scaravilli, 2, and Strada Maggiore, 45, 40125 Bologna
Phone: +39 051 209 8019 and 2600
Fax: +39 051 209 8040 and 2664
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Booth, Alison L. & Coles, Melvyn, 2007. "A microfoundation for increasing returns in human capital accumulation and the under-participation trap," European Economic Review, Elsevier, vol. 51(7), pages 1661-1681, October.
  2. Alos-Ferrer, C., 1998. "Individual Randomness in Economic Models with a Continuum Agents," Papers 9807, Washington St. Louis - School of Business and Political Economy.
  3. Angel de la Fuente & Antonio Ciccone, 2003. "Human capital in a global and knowledge-based economy," Working Papers 70, Barcelona Graduate School of Economics.
  4. Burdett, Ken & Carrillo-Tudela, Carlos & Coles, Melvyn, 2009. "Human Capital Accumulation and Labour Market Equilibrium," IZA Discussion Papers 4215, Institute for the Study of Labor (IZA).
  5. Konrad Podczeck, 2010. "On existence of rich Fubini extensions," Economic Theory, Springer, vol. 45(1), pages 1-22, October.
  6. Alos-Ferrer, Carlos, 1999. "Dynamical Systems with a Continuum of Randomly Matched Agents," Journal of Economic Theory, Elsevier, vol. 86(2), pages 245-267, June.
  7. 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.
  8. Burdett, Ken & Smith, Eric, 2002. "The low skill trap," European Economic Review, Elsevier, vol. 46(8), pages 1439-1451, September.
  9. Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
  10. Cunha, Flavio & Heckman, James & Navarro, Salvador, 2004. "Separating uncertainty from heterogeneity in life cycle earnings," Working Paper Series 2005:6, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  11. Cahuc, Pierre & Postel-Vinay, Fabien & Robin, Jean-Marc, 2003. "Wage Bargaining with On-The-Job Search: Theory and Evidence," CEPR Discussion Papers 4154, C.E.P.R. Discussion Papers.
  12. Al-Najjar, Nabil I., 2004. "Aggregation and the law of large numbers in large economies," Games and Economic Behavior, Elsevier, vol. 47(1), pages 1-35, April.
  13. Sun, Yeneng, 2006. "The exact law of large numbers via Fubini extension and characterization of insurable risks," Journal of Economic Theory, Elsevier, vol. 126(1), pages 31-69, January.
  14. Booth, Alison L & Coles, Melvyn G & Gong, Xiaodong, 2007. "Increasing Returns to Education: Theory and Evidence," CEPR Discussion Papers 6266, C.E.P.R. Discussion Papers.
  15. Sun, Yeneng & Zhang, Yongchao, 2009. "Individual risk and Lebesgue extension without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 144(1), pages 432-443, January.
  16. Eran Yashiv, 2005. "Evaluating the Performance of the Search and Matching Model," CEP Discussion Papers dp0677, Centre for Economic Performance, LSE.
  17. Michael Sattinger, 2003. "A Search Version of the Roy Model," Discussion Papers 03-08, University at Albany, SUNY, Department of Economics.
  18. repec:oup:restud:v:57:y:1990:i:2:p:279-98 is not listed on IDEAS
  19. repec:oup:restud:v:62:y:1995:i:1:p:115-29 is not listed on IDEAS
  20. Konrad Podczeck & Daniela Puzzello, 2012. "Independent random matching," Economic Theory, Springer, vol. 50(1), pages 1-29, May.
  21. Olivier Charlot & Bruno Decreuse, 2006. "Over-education for the rich vs under-education for the poor: a search-theoretic microfoundation," Working Papers halshs-00409583, HAL.
  22. Robert Shimer, 2001. "The Assignment of Workers to Jobs In an Economy with Coordination Frictions," NBER Working Papers 8501, National Bureau of Economic Research, Inc.
  23. Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
  24. Allen, Beth, 1985. "The existence of rational expectations equilibria in a large economy with noisy price observations," Journal of Mathematical Economics, Elsevier, vol. 14(1), pages 67-103, February.
  25. Charlot, Olivier & Decreuse, Bruno, 2005. "Self-selection in education with matching frictions," Labour Economics, Elsevier, vol. 12(2), pages 251-267, April.
  26. repec:oup:qjecon:v:111:y:1996:i:3:p:779-804 is not listed on IDEAS
  27. Giorgio Brunello & Margherita Fort & Guglielmo Weber, 2009. "Changes in Compulsory Schooling, Education and the Distribution of Wages in Europe," Economic Journal, Royal Economic Society, vol. 119(536), pages 516-539, 03.
  28. Rosen, Sherwin, 1978. "Substitution and Division of Labour," Economica, London School of Economics and Political Science, vol. 45(179), pages 235-50, August.
  29. Cunha, Flavio & Heckman, James J., 2007. "Identifying and Estimating the Distributions of Ex Post and Ex Ante Returns to Schooling," Labour Economics, Elsevier, vol. 14(6), pages 870-893, December.
  30. C. Mendolicchio & D. Paolini & T. Pietra, 2008. "Human Capital Policies in a Static, Two-Sector Economy with Imperfect Markets," Working Paper CRENoS 200807, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  31. Booth, Alison L. & Coles, Melvyn, 2005. "Increasing Returns to Education and the Skills Under-Investment Trap," IZA Discussion Papers 1657, Institute for the Study of Labor (IZA).
  32. Charlot, Olivier & Decreuse, Bruno & Granier, Pierre, 2005. "Adaptability, productivity, and educational incentives in a matching model," European Economic Review, Elsevier, vol. 49(4), pages 1007-1032, May.
  33. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  34. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bol:bodewp:702. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Luca Miselli)

The email address of this maintainer does not seem to be valid anymore. Please ask Luca Miselli to update the entry or send us the correct address

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.