Efficiency in a Search and Matching Model with Endogenous Participation
8 Pages Posted: 7 Apr 2009
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