A discrete-time stochastic model of job matching

Tony E. Smith, Yves Zenou

Research output: Contribution to journalReview ArticleResearchpeer-review

16 Citations (Scopus)

Abstract

In this paper, an explicit micro scenario is developed which yields a well-defined aggregate job matching function. In particular, a stochastic model of job-matching behavior is constructed in which the system steady state is shown to be approximated by an exponential-type matching function, as the population becomes large. This steady-state approximation is first derived for fixed levels of both wages and search intensities, where it is shown (without using a free-entry condition) that there exists a unique equilibrium. It is then shown that if job searchers are allowed to choose their search intensities optimally, this model is again consistent with a unique steady state. Finally, the assumption of a fixed wage is relaxed, and an optimal 'offer wage' is derived for employers.

Original languageEnglish
Pages (from-to)54-79
Number of pages26
JournalReview of Economic Dynamics
Volume6
Issue number1
DOIs
Publication statusPublished - Jan 2003
Externally publishedYes

Keywords

  • Endogenous wages
  • Job matching
  • Large population approximation
  • Optimal search intensity
  • Search

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