On-The-Job Search and Sorting

Pieter Gautier, C. N. Teulings () and Aico van Vuuren

No 1687, IZA Discussion Papers from Institute of Labor Economics (IZA)

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. 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: optimal UI benefits; assignment; efficiency; on-the-job search; search frictions (search for similar items in EconPapers)
JEL-codes: J3 J6 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2005-07
New Economics Papers: this item is included in nep-dge and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

Published - published as "On-the-job search, mismatch and efficiency" in: Review of Economic Studies, 2010, 77 (1), 245-272

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Related works:
Working Paper: On-the-Job Search and Sorting (2006)
Working Paper: On-the-Job Search and Sorting (2005)
Working Paper: On-the-Job Search and Sorting (2005)
Working Paper: On-the-Job Search and Sorting (2005)
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