A NOTE ON WAGE DETERMINATION UNDER MISMATCH

William Hawkins

Macroeconomic Dynamics, 2015, vol. 19, issue 8, 1866-1879

Abstract: Shimer (Mismatch, American Economic Review 97, 1074–1101 [2007]) introduced a model of mismatch in which limited mobility of vacant jobs and unemployed workers provides a microfoundation for their coexistence in equilibrium. He assumed that the short side of a local labor market receives all the gains from trade. In this note I show that modifying this assumption on wage-setting can deliver more reasonable predictions for wages at the level of the local market and in the aggregate.

Date: 2015
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