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Efficiency in a Search and Matching Model with Endogenous Participation


  • Albrecht, James

    () (Georgetown University)

  • Navarro, Lucas

    () (Universidad Alberto Hurtado)

  • Vroman, Susan

    () (Georgetown University)


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.

Suggested Citation

  • Albrecht, James & Navarro, Lucas & Vroman, Susan, 2009. "Efficiency in a Search and Matching Model with Endogenous Participation," IZA Discussion Papers 4097, Institute for the Study of Labor (IZA).
  • Handle: RePEc:iza:izadps:dp4097

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    References listed on IDEAS

    1. James Albrecht & Lucas Navarro & Susan Vroman, 2009. "The Effects of Labour Market Policies in an Economy with an Informal Sector," Economic Journal, Royal Economic Society, vol. 119(539), pages 1105-1129, July.
    2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    3. 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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    Cited by:

    1. Engelhardt, Bryan & Fuller, David L., 2012. "Labor force participation and pair-wise efficient contracts with search and bargaining," Labour Economics, Elsevier, vol. 19(3), pages 388-402.
    2. Frédéric Gavrel, 2015. "Participation, Recruitment Selection, and the Minimum Wage," Scandinavian Journal of Economics, Wiley Blackwell, vol. 117(4), pages 1281-1305, October.
    3. Flórez, Luz A., 2017. "Informal sector under saving: A positive analysis of labour market policies," Labour Economics, Elsevier, vol. 44(C), pages 13-26.
    4. Masters, Adrian, 2015. "Efficiency in a search and matching model with participation policy," Economics Letters, Elsevier, vol. 134(C), pages 111-113.
    5. Laureys, Lien, 2014. "The cost of human capital depreciation during unemployment," Bank of England working papers 505, Bank of England.
    6. Hairault, Jean-Olivier & Langot, François & Zylberberg, André, 2015. "Equilibrium unemployment and retirement," European Economic Review, Elsevier, vol. 79(C), pages 37-58.
    7. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
    8. Charlot, Olivier & Malherbet, Franck & Ulus, Mustafa, 2013. "Efficiency in a search and matching economy with a competitive informal sector," Economics Letters, Elsevier, vol. 118(1), pages 192-194.
    9. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 843-882.
    10. Frédéric Gavrel, 2011. "Is the Formal Sector too Large or too Small? A Reexamination of Minimum Wages in Developing Countries," Economics Working Paper Archive (University of Rennes 1 & University of Caen) 201108, Center for Research in Economics and Management (CREM), University of Rennes 1, University of Caen and CNRS.
    11. Lehmann, Etienne & Montero Ledezma, Paola L. & Van der Linden, Bruno, 2013. "Inefficient Equilibrium Unemployment in a Duocentric Economy with Matching Frictions," IZA Discussion Papers 7828, Institute for the Study of Labor (IZA).
    12. Gavrel, Frédéric, 2011. "On the efficiency of participation with vertically differentiated workers," Economics Letters, Elsevier, vol. 112(1), pages 100-102, July.
    13. Susan Vroman, 2015. "Directed Search with Phantom Vacancies," 2015 Meeting Papers 649, Society for Economic Dynamics.
    14. Cristian Aedo & Ian Walker, 2012. "Skills for the 21st Century in Latin America and the Caribbean," World Bank Publications, The World Bank, number 2236, March.
    15. Gavrel, Frédéric, 2012. "On the inefficiency of matching models of unemployment with heterogeneous workers and jobs when firms rank their applicants," European Economic Review, Elsevier, vol. 56(8), pages 1746-1758.
    16. Laureys, Lien, 2014. "The cost of human capital depreciation during unemployment," LSE Research Online Documents on Economics 86337, London School of Economics and Political Science, LSE Library.
    17. Lehmann, Etienne & Montero Ledezma, Paola L. & Linden, Bruno Van der, 2016. "Workforce location and equilibrium unemployment in a duocentric economy with matching frictions," Journal of Urban Economics, Elsevier, vol. 91(C), pages 26-44.
    18. Benoît Julien & Sephorah Mangin, 2016. "Efficiency in Search and Matching Models: A Generalized Hosios Condition," Monash Economics Working Papers 28-16, Monash University, Department of Economics.
    19. Julien, Benoît & Mangin, Sephorah, 2017. "Efficiency of job creation in a search and matching model with labor force participation," Economics Letters, Elsevier, vol. 150(C), pages 149-151.
    20. Gonzalez-Rozada, Martin & Ruffo, Hernán, 2016. "Optimal unemployment benefits in the presence of informal labor markets," Labour Economics, Elsevier, vol. 41(C), pages 204-227.

    More about this item


    participation; efficiency; matching; search; Hosios rule;

    JEL classification:

    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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