Efficiency in a matching model with heterogeneous agents: too many good or bad jobs?
Maite Blázquez Cuesta () and
UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
This paper analyzes the efficiency of the equilibrium allocation in a matching model with two types of workers and jobs. The technology is such that high-skill workers can perform all jobs, while low-skill workers can only perform unskilled jobs. In this setup two types equilibria may occur. A cross-skill matching equilibrium in which high-skill workers accept all jobs and an ex-post segmentation equilibrium in which they accept only skilled jobs. Our first result shows that the equilibrium with ex-post bargaining is never efficient. Second, under Hosios'(1990) condition we show that low-skill workers are overvalued, while the opposite holds for high-skill workers. In equilibrium, firms therefore create too few unskilled jobs and too many skilled jobs. In addition, high-skill workers may decide to accept unskilled jobs while the efficient allocation features ex-post segmentation. Finally, in an extension we show that efficiency can be restored through taxation and we analyze how workers bargaining strength affects unemployment and the degree of skill-mismatch.
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Working Paper: Efficiency in a Matching Model with Heterogeneous Agents: Too Many Good or Bad Jobs? (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:cte:werepe:we035019
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