Complementary jobs and optimal matching
LABOUR, 2021, vol. 35, issue 3, 291-310
This paper introduces strong complementarities in labour into an otherwise classical Diamond–Mortensen–Pissarides search model. Specifically, two workers are required to perform a task. The assumption of Nash bargaining is maintained to represent the Hosios condition transparently. We show that this setup leads to additional externalities that require more than a Hosios‐style condition to be met. The surplus must be shared between the workers so that the employer internalizes additional externalities. This makes implementing efficiency even more challenging.
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