The Balance Condition in Search-and-Matching Models
28 Pages Posted: 26 Nov 2018 Last revised: 16 Aug 2019
Date Written: August 15, 2019
Most of the literature that studies frictional search-and-matching models with heterogeneous agents and random search investigates steady-state equilibria. Steady-state equilibrium requires, in particular, that the flows of agents into and out of the population of unmatched agents balance. We investigate the structure of this balance condition, taking agents' matching behavior as given. Building on the "fundamental matching lemma" for quadratic search technologies in Shimer and Smith (2000), we establish existence, uniqueness, and comparative-static properties of the solution to the balance condition for any search technology satisfying minimal regularity conditions. Implications for the existence and structure of steady-state equilibria are noted.
Keywords: Search, Matching, Steady States
JEL Classification: C78, D83
Suggested Citation: Suggested Citation