Efficiency in a Search and Matching Model with Endogenous Participation
We show that in a search/matching model with endogenous participation in which workers are heterogeneous with respect to market productivity, satisfying the Hosios rule leads to excessive vacancy creation. The reason is that the marginal worker does not internalize the effect of his or her participation on average productivity.
|Date of creation:||Mar 2009|
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|Publication status:||published in: Economics Letters, 2010, 106 (1), 48-50|
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