Variable Search Intensity in an Economy with Coordination Unemployment

Leo Kaas ()

No 3697, IZA Discussion Papers from Institute for the Study of Labor (IZA)

Abstract: This paper analyzes an urn-ball matching model in which workers decide how intensively they sample job openings and apply at a stochastic number of suitable vacancies. Equilibrium is not constrained efficient; entry is excessive and search intensity can be too high or too low. Moreover, an inefficient discouraged-worker effect among homogenous workers emerges under adverse labor market conditions. Unlike existing coordination-friction economies with fixed search intensity, the model can account for the empirical relation between the job-finding rate and the vacancy-unemployment ratio, provided that search costs are small and that search intensity is sufficiently procyclical.

Keywords: matching function; coordination frictions; unemployment (search for similar items in EconPapers)
JEL-codes: E24 J63 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
Date: 2008-09
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