Efficiency in a Search and Matching Model with Endogenous Participation

Albrecht, James; Navarro, Lucas; Vroman, Susan

doi:10.2139/ssrn.1373331

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Efficiency in a Search and Matching Model with Endogenous Participation

IZA Discussion Paper No. 4097

8 Pages Posted: 7 Apr 2009

See all articles by James Albrecht

James Albrecht

Georgetown University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Susan Vroman

Georgetown University; IZA Institute of Labor Economics

Abstract

We show that in a search/matching model with endogenous participation in which workers are heterogeneous with respect to market productivity, satisfying the Hosios rule leads to excessive vacancy creation. The reason is that the marginal worker does not internalize the effect of his or her participation on average productivity.

Keywords: search, matching, efficiency, participation, Hosios rule

JEL Classification: D8, J6

Suggested Citation: Suggested Citation

Albrecht, James W. and Navarro, Lucas and Vroman, Susan B., Efficiency in a Search and Matching Model with Endogenous Participation. IZA Discussion Paper No. 4097, Available at SSRN: https://ssrn.com/abstract=1373331 or http://dx.doi.org/10.2139/ssrn.1373331