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The Right Man for the Job

This paper describes a search model with a continuum of workerand job types, transferable utility and an increasing returns to scale contact technology. We apply a second order Taylor expansion to characterize the equilibrium. One third of theincreasing returns in contacts are absorbed by firms and workers being more choosy. Hence, strongly increasing returns in contact rates are consistent with weakly increasing returns in matching. The resulting equilibrium is not efficient. Unemployment benefitscan reduce the loss by serving as a search subsidy. The loss caused by search frictions is higher when worker types are bad substitutes. Numerical simulations of the model show our Taylor expansions to be quite accurate.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 540.

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Date of creation: 2001
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Handle: RePEc:ces:ceswps:_540
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  1. Burdett, Kenneth & Coles, Melvyn G, 1999. "Long-Term Partnership Formation: Marriage and Employment," Economic Journal, Royal Economic Society, vol. 109(456), pages F307-34, June.
  2. P. Diamond, 1980. "Mobility Costs, Frictional Unemployment and Efficiency," Working papers 257, Massachusetts Institute of Technology (MIT), Department of Economics.
  3. Burdett, Kenneth, 1979. "Unemployment Insurance Payments as a Search Subsidy: A Theoretical Analysis," Economic Inquiry, Western Economic Association International, vol. 17(3), pages 333-43, July.
  4. repec:dgr:uvatin:19980095 is not listed on IDEAS
  5. Ramon Marimon & Fabrizio Zilibotti, 1997. "Unemployment vs. mismatch of talents: Reconsidering unemployment benefits," Economics Working Papers 211, Department of Economics and Business, Universitat Pompeu Fabra.
  6. 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.
  7. Pissarides, Christopher A, 1994. "Search Unemployment with On-the-Job Search," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 457-75, July.
  8. P. Diamond, 1980. "Aggregate Demand Management in Search Equilibrium," Working papers 268, Massachusetts Institute of Technology (MIT), Department of Economics.
  9. Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
  10. Robert Shimer, 1999. "The Impact of Young Workers on the Aggregate Labor Market," NBER Working Papers 7306, National Bureau of Economic Research, Inc.
  11. Burdett, Ken & Coles, Melvyn G, 1997. "Marriage and Class," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 141-68, February.
  12. Berman, Eli, 1997. "Help Wanted, Job Needed: Estimates of a Matching Function from Employment Service Data," Journal of Labor Economics, University of Chicago Press, vol. 15(1), pages S251-92, January.
  13. Shimer, R. & Smith, L., 1997. "Assortative Matching and Search," Working papers 97-2b, Massachusetts Institute of Technology (MIT), Department of Economics.
  14. Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
  15. Kenneth Burdett & Dale T. Mortensen, 1989. "Equilibrium Wage Differentials and Employer Size," Discussion Papers 860, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  16. repec:ner:tilbur:urn:nbn:nl:ui:12-153334 is not listed on IDEAS
  17. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
  18. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
  19. Lones Smith, 1995. "Cross-Sectional Dynamics in a Two-Sided Matching Model," Working papers 95-14, Massachusetts Institute of Technology (MIT), Department of Economics.
  20. Teulings, Coen N, 1995. "The Wage Distribution in a Model of the Assignment of Skills to Jobs," Journal of Political Economy, University of Chicago Press, vol. 103(2), pages 280-315, April.
  21. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  22. Diamond, Peter A, 1982. "Wage Determination and Efficiency in Search Equilibrium," Review of Economic Studies, Wiley Blackwell, vol. 49(2), pages 217-27, April.
  23. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
  24. Burdett, Kenneth & Coles, Melvyn G & van Ours, Jan C, 1994. "Temporal Aggregation Bias in Stock-Flow Models," CEPR Discussion Papers 967, C.E.P.R. Discussion Papers.
  25. Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May.
  26. Sattinger, Michael, 1975. "Comparative Advantage and the Distributions of Earnings and Abilities," Econometrica, Econometric Society, vol. 43(3), pages 455-68, May.
  27. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
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