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Search externalities with crowding-out effects

Author

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  • Decreuse, Bruno

Abstract

We propose a static search model with two types of workers, output sharing (Nash bargaining), and free entry of firms. The matching function is specified so as the unskilled do not create congestion effects for the skilled. An increase in the share of skilled workers has two effects on the welfare of the unskilled: a negative crowding-out effect, and a positive labour demand effect. The former (latter) effect dominates whenever the skill differential is small (large).

Suggested Citation

  • Decreuse, Bruno, 2008. "Search externalities with crowding-out effects," MPRA Paper 6949, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:6949
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    Keywords

    Matching frictions; Heterogeneity; Congestion effects;
    All these keywords.

    JEL classification:

    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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