Investing in skill and searching for coworkers: endogenous participation in a matching market

Chris Bidner, Guillaume Roger, Jessica Moses

Research output: Contribution to journalArticleResearchpeer-review

Abstract

We demonstrate how search frictions have important yet subtle implications for participation in a skilled labor market by studying a model in which agents invest in skill prior to searching for coworkers. Search frictions induce the existence of acceptance-constrained equilibria, whereby matching concerns-as opposed to investment costs-dissuade the marginal agent from investing and participating in the skilled matching market. Such equilibria are robust, relevant, and have comparative static properties that contrast sharply with the intuitive properties arising in a benchmark static setting. We consider an extension with separate matching "marketplaces," and show that our main results continue to hold.

Original languageEnglish
Pages (from-to)166-202
Number of pages37
JournalAmerican Economic Journal: Microeconomics
Volume8
Issue number1
DOIs
Publication statusPublished - 2016
Externally publishedYes

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