Departmental Papers (ESE)

Abstract

In this paper, an explicit micro scenario is developed which yields a well-defined aggregate job matching function. In particular, a stochastic model of job-matching behavior is constructed in which the system steady state is shown to be approximated by an exponential-type matching function, as the population becomes large. This steady-state approximation is first derived for fixed levels of both wages and search intensities, where it is shown (without using a free-entry condition) that there exists a unique equilibrium. It is then shown that if job searchers are allowed to choose their search intensities optimally, this model is again consistent with a unique steady state. Finally, the assumption of a fixed wage is relaxed, and an optimal 'offer wage' is derived for employers.

Document Type

Journal Article

Date of this Version

January 2003

Comments

Postprint version. Published in Review of Economic Dynamics, Volume 6, Issue 1, January 2003, pages 54-79.
Publisher URL: http://dx.doi.org/10.1016/S1094-2025(02)00007-8

Keywords

discrete-time matching function, large population approximation, optimal search intensity, optimal offer wage

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Date Posted: 21 January 2006

This document has been peer reviewed.