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Matching externalities and inventive productivity


  • Robert M. Hunt


This paper generalizes and extends the labor market search and matching model of Berliant, Reed, and Wang (2006). In this model, the density of cities is determined endogenously, but the matching process becomes more efficient as density increases. As a result, workers become more selective in their matches, and this raises average productivity (the intensive margin). Despite being more selective, the search process is more rapid so that workers spend more time in productive matches (the extensive margin). The effect of an exogenous increase in land area on productivity depends on the sensitivity of the matching function and congestion costs to changes in density.

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  • Robert M. Hunt, 2007. "Matching externalities and inventive productivity," Working Papers 07-7, Federal Reserve Bank of Philadelphia.
  • Handle: RePEc:fip:fedpwp:07-7

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    References listed on IDEAS

    1. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    2. Berliant, Marcus & Reed III, Robert R. & Wang, Ping, 2006. "Knowledge exchange, matching, and agglomeration," Journal of Urban Economics, Elsevier, vol. 60(1), pages 69-95, July.
    3. Ken Burdett & Randall Wright, 1998. "Two-Sided Search with Nontransferable Utility," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(1), pages 220-245, January.
    4. Mark Bagnoli & Ted Bergstrom, 1994. "Log-Concave Utility and its Applications," Microeconomics 9410002, EconWPA.
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    Cited by:

    1. Gerald A. Carlino & Robert M. Hunt, 2009. "What explains the quantity and quality of local inventive activity?," Working Papers 09-12, Federal Reserve Bank of Philadelphia.

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