Endogenous matching functions: An agent-based computational approach

Michael Neugart

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: The matching function has become a popular tool in labor economics. It relates job creation (a flow variable) to two stock variables: vacancies and job searchers. In most studies the matching function is considered to be exogenous and assumed to have certain properties. The present study, instead, looks at the properties of an endogenous matching function. For this purpose we have programmed an agent-based computational labor market model with endogenous job creation and endogenous job search behavior. Our~simulations suggest that the endogenous matching technology is subject to decreasing returns to scale. The Beveridge curve reveals substitutability of job searchers and vacancies for a small range of inputs, but is flat for relatively high numbers of job searchers and vertical for relatively high numbers of vacancies. Moreover, the matching technology changes with labor market policies. This raises concerns about the validity of labor market policy evaluations conducted with flow models of the labor market that employ exogenous matching functions.

Date: 2024-06-24
New Economics Papers: this item is included in nep-cmp
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Published in Advances in Complex Systems 2 (2024-06-24)

Downloads: (external link)
https://tuprints.ulb.tu-darmstadt.de/27428
https://doi.org/10.1142/S0219525904000147

Related works:
Chapter: ENDOGENOUS MATCHING FUNCTIONS: AN AGENT-BASED COMPUTATIONAL APPROACH (2004)
Journal Article: ENDOGENOUS MATCHING FUNCTIONS: AN AGENT-BASED COMPUTATIONAL APPROACH (2004)
Working Paper: Endogenous matching functions: an agent-based computational approach (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:dar:wpaper:146279

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