The Assignment of Workers to Jobs with Endogenous Information Selection

Paulina Restrepo-Echavarria, Antonella Tutino and Anton Cheremukhin
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Antonella Tutino: Federal Reserve Bank of Dallas

No 164, 2012 Meeting Papers from Society for Economic Dynamics

Abstract: We present a model where information processing constraints on workers and firms lead to an endogenous matching function. We provide conditions under which the matching process has a unique equilibrium computable in closed-form. The main finding is that equilibrium matching is generally inefficient. This result does not depend on the form of heterogeneity, the distribution of surplus or bargaining rules. It is driven by information processing constraints which weaken the strategic complementarities and enhance the negative externalities in search efforts of workers and firms. A closed-form solution of the model provides a bound on the size of this inefficiency.

Date: 2012
New Economics Papers: this item is included in nep-dge and nep-mic
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Citations: View citations in EconPapers (4)

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