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An Incentive Theory of Matching

Alessio Brown, Christian Merkl () and Dennis J. Snower

No 7283, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs, and firms face adjustment costs in responding to these variations. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. This approach obviates the need for a matching function. On this theoretical basis, we argue that the matching function is vulnerable to the Lucas critique. Our calibrated model for the U.S. economy can account for important empirical regularities that the conventional matching model cannot.

Keywords: Adjustment costs; employment; Firing; Incentives; Job acceptance; Job offers; Matching; quits; unemployment (search for similar items in EconPapers)
JEL-codes: E24 E32 J63 J64 (search for similar items in EconPapers)
Date: 2009-04
New Economics Papers: this item is included in nep-dge, nep-lab, nep-ltv and nep-mac
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Related works:
Journal Article: AN INCENTIVE THEORY OF MATCHING (2015) Downloads
Working Paper: An Incentive Theory of Matching (2010) Downloads
Working Paper: An Incentive Theory of Matching (2010) Downloads
Working Paper: An Incentive Theory of Matching (2009) Downloads
Working Paper: An incentive theory of matching (2009) Downloads
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