On-the-Job Search and Sorting

Tinbergen Institute Discussion Paper No. 2005-070/3

44 Pages Posted: 24 Nov 2005

See all articles by Pieter A. Gautier

Pieter A. Gautier

Free University of Amsterdam; Tinbergen Institute Amsterdam (TIA); IZA Institute of Labor Economics

Coen N. Teulings

University of Amsterdam; University of Cambridge

Aico van Vuuren

VU University Amsterdam - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: May 2005

Abstract

We characterize the equilibrium of a search model with a continuum of job and worker types, wage bargaining, free entry of vacancies and on-the-job search. Although on-the-job search reduces the output loss due to frictions, it increases the wage differentials. The decentralized economy with monopsonistic wage setting yields too many vacancies and hence too low unemployment compared to first best, due to a business-stealing externality. Raising workers' bargaining power resolves this inefficiency. Unemployment benefits are a second best alternative to this policy.

Keywords: assignment, on-the-job search, wage bargaining, sorting

JEL Classification: E24, J21, J23

Suggested Citation

Gautier, Pieter A. and Teulings, Coen N. and van Vuuren, Aico, On-the-Job Search and Sorting (May 2005). Tinbergen Institute Discussion Paper No. 2005-070/3, Available at SSRN: https://ssrn.com/abstract=751944 or http://dx.doi.org/10.2139/ssrn.751944

Pieter A. Gautier (Contact Author)

Free University of Amsterdam ( email )

Amsterdam, ND North Holland
Netherlands

Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS
Netherlands

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Coen N. Teulings

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB
Netherlands

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Aico Van Vuuren

VU University Amsterdam - Department of Economics ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

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