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Efficiency of Simultaneous Search

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  • Philipp Kircher

    (Department of Economics, University of Pennsylvania)

Abstract

We analyze a labor search model in which workers choose their search intensity by deciding how often and where to apply for jobs. They observe firms’ wage postings prior to their decision. Due to coordination frictions a firm may not receive any applications; otherwise it is able to hire unless all its applicants have better offers. We show that in equilibrium the entry of firms, the search intensity and the number of filled vacancies are constrained efficient. Wage dispersion creates an (endogenous) safety net against unemployment that is essential for efficiency. As application costs vanish the equilibrium becomes unconstrained efficient.

Suggested Citation

  • Philipp Kircher, 2008. "Efficiency of Simultaneous Search," PIER Working Paper Archive 08-004, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    • Handle: RePEc:pen:papers:08-004
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    References listed on IDEAS

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    More about this item

    Keywords

    simultaneous search; directed search; efficient wage dispersion; modified Hosios condition; search with stable matchings;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation

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