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The Employed, the Unemployed, and the Unemployable: Directed Search with Worker Heterogeneity

Author

Listed:
  • Lawrence Uren

    (University of Melbourne)

  • Ian King

    (University of Melbourne)

  • Suren Basov

    (LaTrobe University)

Abstract
We examine the implications of worker heterogeneity on the equilibrium matching process, using a directed search model. Worker abilities are selected from a general distribution, subject to some weak regularity requirements, and the firms direct their job offers to workers. For large markets we derive a simple closed form expression for the equilibrum matching function. This function has constant returns to scale and two new terms, which are functions of the underlying distribution of worker productivities: the percentage of workers who are employable, and a measure of heterogeneity (kappa). The equilibrium unemployment rate is increasing in kappa and, under certain circumstances, is increasing in the productivity of highly skilled workers, despite endogenous entry.

Suggested Citation

  • Lawrence Uren & Ian King & Suren Basov, 2011. "The Employed, the Unemployed, and the Unemployable: Directed Search with Worker Heterogeneity," 2011 Meeting Papers 292, Society for Economic Dynamics.
    • Handle: RePEc:red:sed011:292
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    References listed on IDEAS

    as
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    Cited by:

    1. Kircher, Philipp & Kim, Kyungmin, 2013. "Efficient Competition through Cheap Talk: Competing Auctions and Competitive Search without Ex Ante Price Commitment," CEPR Discussion Papers 9785, C.E.P.R. Discussion Papers.

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    More about this item

    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

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