Journal Article

The Right Man for the Job

Coen N. Teulings and Pieter A. Gautier

in The Review of Economic Studies

Published on behalf of Review of Economic Studies Ltd

Volume 71, issue 2, pages 553-580
Published in print April 2004 | ISSN: 0034-6527
Published online April 2004 | e-ISSN: 1467-937X | DOI: http://dx.doi.org/10.1111/0034-6527.00296
The Right Man for the Job

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  • Particular Labour Markets
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  • Mobility, Unemployment, and Vacancies

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This paper describes a search model with a continuum of worker and job types, free entry and transferable utility. We apply a second-order Taylor expansion to characterize the equilibrium, derive the “cost of search” and show that it is decreasing in the substitutability of worker types. This cost of search is then decomposed into three components: unemployment, vacancy costs and mismatch. Our contact technology rules out congestion effects between different worker types and therefore exhibits increasing returns to scale. One third of those increasing returns in contacts are shown to be absorbed by firms and workers being more choosy. The resulting equilibrium is not efficient. Unemployment benefits can reduce the loss by serving as a search subsidy. Numerical simulations of the model show that our Taylor expansions are quite accurate.

Keywords: J41; J63; J64; M51

Journal Article.  14220 words.  Illustrated.

Subjects: Particular Labour Markets ; Economics ; Mobility, Unemployment, and Vacancies

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