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Scale Effects in Markets with Search

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  • Pissarides, Christopher
  • Petrongolo, Barbara

Abstract

Reduced-form tests of scale effects in markets with search, run when aggregate matching functions are estimated, may miss important scale effects at the micro level, because of the reactions of job searchers. A semi-structural model is developed and estimated on a British sample, testing for scale effects on the offer arrival rate and the wage offer distribution. When contrasting London with the rest of the country we find scale effects in wage offers. But the larger market delivers higher realized wages and not more matches, because the scale effects on matches are offset by the response of reservation wages.

Suggested Citation

  • Pissarides, Christopher & Petrongolo, Barbara, 2002. "Scale Effects in Markets with Search," CEPR Discussion Papers 3648, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:3648
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    More about this item

    Keywords

    Job search; Economies of scale; Matching; Aggregate matching functions;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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