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A Theory of Production, Matching, and Distribution

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  • Sephorah Mangin

Abstract

This paper presents a unified approach to production, matching, and distribution in an environment with labor market frictions. I use competing auctions as both a wage determination mechanism and a microfoundation for an aggregate production and matching technology. For any well-behaved distribution of firm productivities, I show that the aggregate production function exhibits standard neoclassical properties and an elasticity of substitution between capital and labor that is always less than or equal to one. If the distribution is Pareto or power law, this function is particularly tractable. In general, factor income shares vary with the degree of competition between firms to hire workers, the value of non-market activity, and characteristics of the underlying firm productivity distribution. Unlike Diamond-Mortensen-Pissarides style search models with Nash bargaining, production and distribution are endogenously tightly connected: the economy satisfies a generalized version of the Hosios condition.

Suggested Citation

  • Sephorah Mangin, 2015. "A Theory of Production, Matching, and Distribution," Monash Economics Working Papers 27-15, Monash University, Department of Economics.
  • Handle: RePEc:mos:moswps:2015-27
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    Cited by:

    1. Johannes Boehm, 2014. "The Impact of Contract Enforcement Costs on Outsourcing and Aggregate Productivity," 2014 Meeting Papers 340, Society for Economic Dynamics.
    2. Ezra Oberfield & Devesh Raval, 2021. "Micro Data and Macro Technology," Econometrica, Econometric Society, vol. 89(2), pages 703-732, March.
    3. Mangin, Sephorah & Julien, Benoît, 2021. "Efficiency in search and matching models: A generalized Hosios condition," Journal of Economic Theory, Elsevier, vol. 193(C).
    4. Stephen J. DeCanio, 2022. "Simple efficiency-distribution models of production, with an application to robotics," SN Business & Economics, Springer, vol. 2(8), pages 1-16, August.
    5. Johannes Boehm, 2020. "The Impact of Contract Enforcement Costs on Outsourcing and Aggregate Productivity," SciencePo Working papers hal-03566762, HAL.
    6. Mangin, Sephorah & Sedláček, Petr, 2018. "Unemployment and the labor share," Journal of Monetary Economics, Elsevier, vol. 94(C), pages 41-59.
    7. Émilien Gouin‐Bonenfant, 2022. "Productivity Dispersion, Between‐Firm Competition, and the Labor Share," Econometrica, Econometric Society, vol. 90(6), pages 2755-2793, November.
    8. Gabaix, Xavier & Laibson, David & Li, Deyuan & Li, Hongyi & Resnick, Sidney & de Vries, Casper G., 2016. "The impact of competition on prices with numerous firms," Journal of Economic Theory, Elsevier, vol. 165(C), pages 1-24.
    9. repec:hal:spmain:info:hdl:2441/185h5h2nvv9lqr7nmeddt9uu5l is not listed on IDEAS
    10. repec:hal:wpspec:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje is not listed on IDEAS
    11. repec:hal:spmain:info:hdl:2441/1uut5itepl9q5osfl3tj7qatje is not listed on IDEAS
    12. DeCanio, Stephen J., 2016. "Robots and humans – complements or substitutes?," Journal of Macroeconomics, Elsevier, vol. 49(C), pages 280-291.

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    More about this item

    JEL classification:

    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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