A Discrete-Time Stochastic Model of Job Matching

Yves Zenou and Tony Smith

No 3044, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: In this Paper, an explicit micro scenario is developed which yields a well-defined aggregate job-matching function. In particular, a stochastic model of job-matching behaviour is constructed in which the system steady state is shown to be approximated by an exponential-type matching function, as the population becomes large. This steady-state approximation is first derived for fixed levels of both wages and search intensities, where it is shown (without using a free-entry condition) that there exists a unique equilibrium. It is then shown that if job searchers are allowed to choose their search intensities optimally, then this model is again consistent with a unique steady state. Finally, the assumption of a fixed wage is relaxed, and an optimal ?offer wage? is derived for employers.

Keywords: Matching function; Large population approximation; Optimal search intensity (search for similar items in EconPapers)
JEL-codes: D83 J41 J61 (search for similar items in EconPapers)
Date: 2001-11
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Citations: View citations in EconPapers (6)

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Journal Article: A Discrete-Time Stochastic Model of Job Matching (2003)
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