 Efficient Sorting in Frictional Labor Markets with Two-sided HeterogeneityUniversité Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL Abstract: This paper studies how search externalities and wage bargaining distort vacancy creation and the allocation of workers to jobs in markets with two-sided heterogeneity. To do so, I propose a model of a frictional labor market where heterogeneous workers decide which job to look for and firms decide which technology to adopt. In equilibrium, there is perfect segmentation across sectors, which is determined by a unique threshold of workers' productivity. This threshold is inefficient due to participation and composition externalities. The Pigouvian tax scheme that decentralizes optimal sorting shows that these externalities have opposite signs. Furthermore, their relative strength depends on the distribution of workers' skills, so that when there are many (few) skilled workers, too many (few) high technology jobs are created. Keywords: Efficiency; Random Matching; Directed Search; Segmentation (search for similar items in EconPapers) Published in Macroeconomic Dynamics, 2016, 20 (01), ⟨10.1017/S1365100514000212⟩ There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:hal:cesptp:hal-01263744 DOI: 10.1017/S1365100514000212 Access Statistics for this paper More papers in Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) from HAL |
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