[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/a/eee/ecmode/v28y2011i3p1090-1098.html
   My bibliography  Save this article

Efficiency of two sided investments in an equilibrium unemployment framework

Author

Listed:
  • Navarro, Lucas
Abstract
This paper investigates the efficiency of investments by firms and workers in a matching model with high- and low-productivity jobs. Search is sector specific and random within sectors. Search frictions and ex-post bargaining imply that wage inequality arises as a result of the difference in investment costs between the sectors. The efficiency properties of the equilibrium are analyzed under the particular division in bargaining proposed by Hosios (1990). The conclusion is that the equilibrium is inefficient, with a too low fraction of workers and a too high vacancy-unemployment ratio in the high-productivity sector. The opposite happens in the low-productivity sector.

Suggested Citation

  • Navarro, Lucas, 2011. "Efficiency of two sided investments in an equilibrium unemployment framework," Economic Modelling, Elsevier, vol. 28(3), pages 1090-1098, May.
    • Handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1090-1098
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0264-9993(10)00245-2
    Download Restriction: Full text for ScienceDirect subscribers only
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Cole, Harold L. & Mailath, George J. & Postlewaite, Andrew, 2001. "Efficient Non-Contractible Investments in Large Economies," Journal of Economic Theory, Elsevier, vol. 101(2), pages 333-373, December.
    2. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Econometrica, Econometric Society, vol. 74(2), pages 323-364, March.
    3. James Albrecht & Susan Vroman, 2002. "A Matching Model with Endogenous Skill Requirements," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(1), pages 283-305, February.
    4. Juan J. Dolado & Marcel Jansen & Juan F. Jimeno, 2009. "On‐the‐Job Search in a Matching Model with Heterogeneous Jobs and Workers," Economic Journal, Royal Economic Society, vol. 119(534), pages 200-228, January.
    5. Leonardo Felli & Kevin Roberts, 2016. "Does Competition Solve the Hold-up Problem?," Economica, London School of Economics and Political Science, vol. 83(329), pages 172-200, January.
    6. Masters, Adrian M, 1998. "Efficiency of Investment in Human and Physical Capital in a Model of Bilateral Search and Bargaining," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 477-494, May.
    7. Uren Lawrence, 2006. "The Allocation of Labor and Endogenous Search Decisions," The B.E. Journal of Macroeconomics, De Gruyter, vol. 6(1), pages 1-31, June.
    8. Blázquez, Maite & Jansen, Marcel, 2008. "Search, mismatch and unemployment," European Economic Review, Elsevier, vol. 52(3), pages 498-526, April.
    9. repec:hal:spmain:info:hdl:2441/dc0ckec3fcb29ms9850c12h1p is not listed on IDEAS
    10. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-849, November.
    11. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2005. "Rising Wage Inequality: The Role of Composition and Prices," NBER Working Papers 11628, National Bureau of Economic Research, Inc.
    12. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, vol. 19(1), pages 1-21, January.
    13. David H. Autor & Lawrence F. Katz & Melissa S. Kearney, 2008. "Trends in U.S. Wage Inequality: Revising the Revisionists," The Review of Economics and Statistics, MIT Press, vol. 90(2), pages 300-323, May.
    14. Gabriele Cardullo, 2009. "Equilibrium in Matching Models with Employment Dependent Productivity," Economics Bulletin, AccessEcon, vol. 29(3), pages 2380-2387.
    15. Steven J. Davis, 2001. "The Quality Distribution of Jobs and the Structure of Wages in Search Equilibrium," NBER Working Papers 8434, National Bureau of Economic Research, Inc.
    16. George J. Mailath & Harold L. Cole & Andrew Postlewaite, 2001. "original papers : Investment and concern for relative position," Review of Economic Design, Springer;Society for Economic Design, vol. 6(2), pages 241-261.
    17. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    18. McKenna, C. J., 1996. "Education and the distribution of unemployment," European Journal of Political Economy, Elsevier, vol. 12(1), pages 113-132, April.
    19. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(3), pages 779-804.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2016. "Formal education versus learning-by-doing: On the labor market efficiency of educational choices," Economic Modelling, Elsevier, vol. 54(C), pages 545-562.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Guillaume Wilemme, 2021. "Optimal Taxation to Correct Job Mismatching," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 40, pages 170-197, April.
    2. repec:cte:werepe:we035120 is not listed on IDEAS
    3. Jansen, Marcel, 2004. "Can Job Competition Prevent Hold-Ups?," IZA Discussion Papers 988, Institute of Labor Economics (IZA).
    4. Jackson, Paul, 2023. "Equilibrium underemployment," Labour Economics, Elsevier, vol. 81(C).
    5. Arnaud Chéron & Jean‐Olivier Hairault & François Langot, 2011. "Age‐Dependent Employment Protection," Economic Journal, Royal Economic Society, vol. 121(557), pages 1477-1504, December.
    6. Richard Rogerson & Robert Shimer & Randall Wright, 2004. "Search-Theoretic Models of the Labor Market-A Survey," NBER Working Papers 10655, National Bureau of Economic Research, Inc.
    7. Yujing Xu, 2022. "Unobservable investments, trade efficiency and search frictions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 55(2), pages 764-799, May.
    8. Xiangbo Liu & Theodore Palivos & Xiaomeng Zhang, 2017. "Immigration, Skill Heterogeneity, And Qualification Mismatch," Economic Inquiry, Western Economic Association International, vol. 55(3), pages 1231-1264, July.
    9. Bester, Helmut, 2013. "Investments and the holdup problem in a matching market," Journal of Mathematical Economics, Elsevier, vol. 49(4), pages 302-311.
    10. Merlino, Luca Paolo, 2016. "Efficient Sorting In Frictional Labor Markets With Two-Sided Heterogeneity," Macroeconomic Dynamics, Cambridge University Press, vol. 20(1), pages 95-119, January.
    11. Charlot, Olivier & Malherbet, Franck, 2013. "Education and employment protection," Labour Economics, Elsevier, vol. 20(C), pages 3-23.
    12. Charlot, Olivier & Decreuse, Bruno & Granier, Pierre, 2005. "Adaptability, productivity, and educational incentives in a matching model," European Economic Review, Elsevier, vol. 49(4), pages 1007-1032, May.
    13. Belan, Pascal & Carré, Martine & Gregoir, Stéphane, 2010. "Subsidizing low-skilled jobs in a dual labor market," Labour Economics, Elsevier, vol. 17(5), pages 776-788, October.
    14. Lucas Navarro, 2007. "Labor market policies in a sector specific search model with heterogeneous firms and workers," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 22(2), pages 29-45, December.
    15. Andrew Shephard & Modibo Sidibe, 2019. "Schooling Investment, Mismatch,and Wage Inequality," PIER Working Paper Archive 19-013, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
    16. Arnaud Chéron & Jean-Olivier Hairault & François Langot, 2013. "Life-Cycle Equilibrium Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 31(4), pages 843-882.
    17. Jerez, Belén, 2017. "Competitive search equilibrium with multidimensional heterogeneity and two-sided ex-ante investments," Journal of Economic Theory, Elsevier, vol. 172(C), pages 202-219.
    18. Shingo Ishiguro, 2010. "Holdup, search, and inefficiency," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 44(2), pages 307-338, August.
    19. de Meza, David & Lockwood, Ben, 2010. "Too much investment? A problem of endogenous outside options," Games and Economic Behavior, Elsevier, vol. 69(2), pages 503-511, July.
    20. Olivier Charlot, 2006. "Éducation, destruction des emplois et performance du marché du travail dans un modèle d'appariement," Revue économique, Presses de Sciences-Po, vol. 57(1), pages 5-33.
    21. Jansen, Marcel, 2010. "Job auctions and hold-ups," Labour Economics, Elsevier, vol. 17(3), pages 608-619, June.

    More about this item

    Keywords

    Matching Search frictions Heterogeneity Efficiency;

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:ecmode:v:28:y:2011:i:3:p:1090-1098. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30411 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.