On-the-Job Search and Sorting

47 Pages Posted: 8 Aug 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

Erasmus University Rotterdam (EUR) - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: September 2005


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. The decentralized economy with monopsonistic wage setting yields too many vacancies and hence too low unemployment compared to first best. This is due to a business-stealing externality. Raising workers' bargaining power resolves this inefficiency. Unemployment benefits are a second best alternative to this policy. We establish simple relations between the losses in production due to search frictions and wage differentials on the one hand and unemployment on the other hand. Both can be used for empirical testing.

Keywords: assignment, on-the-job search, search frictions, efficiency, optimal UI benefits

JEL Classification: J3, J6

Suggested Citation

Gautier, Pieter A. and Teulings, Coen N. and van Vuuren, Aico, On-the-Job Search and Sorting (September 2005). ; CESifo Working Paper Series No. 1537. Available at SSRN: https://ssrn.com/abstract=773948 or http://dx.doi.org/10.2139/ssrn.773948

Pieter A. Gautier (Contact Author)

Free University of Amsterdam ( email )

Amsterdam, ND North Holland

Tinbergen Institute Amsterdam (TIA) ( email )

Gustav Mahlerplein 117
Amsterdam, 1082 MS

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072

Coen N. Teulings

University of Amsterdam ( email )

Spui 21
Amsterdam, 1018 WB

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Aico Van Vuuren

Erasmus University Rotterdam (EUR) - Department of Economics ( email )

P.O. Box 1738
3000 DR Rotterdam
+31 10 4082158 (Phone)
+31 10 4089149 (Fax)

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