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An Incentive Theory of Matching

  • Dennis Snower

    (Kiel Institute for the World Economy)

  • Christian Merkl

    (Kiel Institute for the World Economy)

  • Alessio J. G. Brown

    (Kiel Institute for the World Economy)

We construct a theoretical model explaining two-sided selection through microeconomic incentives. Firms face adjustment costs in responding to heterogeneous variations in the characteristics of workers and jobs. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. Our calibrated model for the U.S. can account for important empirical regularities that the conventional matching model cannot.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 439.

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Date of creation: 2010
Date of revision:
Handle: RePEc:red:sed010:439
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Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA

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