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The Assignment of Workers to Jobs with Endogenous Information Selection

Author

Listed:
  • Paulina Restrepo-Echavarria

    (The Ohio State University)

  • Antonella Tutino

    (Federal Reserve Bank of Dallas)

  • Anton Cheremukhin

    (Federal Reserve Bank of Dallas)

Abstract

We present a model where information processing constraints on workers and firms lead to an endogenous matching function. We provide conditions under which the matching process has a unique equilibrium computable in closed-form. The main finding is that equilibrium matching is generally inefficient. This result does not depend on the form of heterogeneity, the distribution of surplus or bargaining rules. It is driven by information processing constraints which weaken the strategic complementarities and enhance the negative externalities in search efforts of workers and firms. A closed-form solution of the model provides a bound on the size of this inefficiency.

Suggested Citation

  • Paulina Restrepo-Echavarria & Antonella Tutino & Anton Cheremukhin, 2012. "The Assignment of Workers to Jobs with Endogenous Information Selection," 2012 Meeting Papers 164, Society for Economic Dynamics.
  • Handle: RePEc:red:sed012:164
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    File URL: https://economicdynamics.org/meetpapers/2012/paper_164.pdf
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    References listed on IDEAS

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    1. Christopher A. Pissarides & Barbara Petrongolo, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, pages 390-431.
    2. Axel Anderson & Lones Smith, 2010. "Dynamic Matching and Evolving Reputations," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 3-29.
    3. Vives, Xavier, 1990. "Nash equilibrium with strategic complementarities," Journal of Mathematical Economics, Elsevier, vol. 19(3), pages 305-321.
    4. Coles, Melvyn G, 1999. "Turnover Externalities with Marketplace Trading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 851-868, November.
    5. Jan Eeckhout & Philipp Kircher, 2010. "Sorting and Decentralized Price Competition," Econometrica, Econometric Society, vol. 78(2), pages 539-574, March.
    6. Ricardo Lagos, 2000. "An Alternative Approach to Search Frictions," Journal of Political Economy, University of Chicago Press, vol. 108(5), pages 851-873, October.
    7. Margaret Stevens, 2007. "New Microfoundations For The Aggregate Matching Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 847-868, August.
    8. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    9. 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.
    10. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
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    Cited by:

    1. Pasten, Ernesto & Schoenle, Raphael, 2016. "Rational inattention, multi-product firms and the neutrality of money," Journal of Monetary Economics, Elsevier, pages 1-16.
    2. Luo, Yulei & Young, Eric, 2013. "Rational Inattention in Macroeconomics: A Survey," MPRA Paper 54267, University Library of Munich, Germany.
    3. James Costain, 2017. "Costly decisions and sequential bargaining," Working Papers 1729, Banco de España;Working Papers Homepage.

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