Search externalities with crowding-out effects

We consider a static search model with two types of workers, Nash bargaining, and free entry of firms. The matching function is specified so as cross-type congestion effects are asymmetric. Skilled workers create congestion effects for all, while unskilled workers do not affect the odds of employment for the skilled. An increase in the share of skilled workers has two effects on the welfare of the unskilled: a negative crowding-out effect, and a positive labor demand effect. The former (latter) effect dominates whenever the skill differential is small (large).matching frictions, heterogeneity, congestion effects

Choosy search and the mismatch of talents

This paper proposes a multi-sector matching model where workers have (symmetric) sector-specific skills and the search market is segmented by sector. Workers choose the range of markets they are willing to participate in. I identify a composition externality: workers do not take into account the impact of their choice on sector-specific mean productivity among the pools of job-seekers. Consequently, workers prospect too many market segments, and there is room for public policy even when the so-called Hosios condition holds.Composition effects; Heterogeneity; Segmented markets; Efficiency

Labor productivity and dynamic efficiency

This note exhibits sufficient conditions concerning the skills of old workers ruling out overaccumulation stationnary equilibria in an OLG model with productive capital. Using a Cobb-Douglas economy, we show that such conditions seem to be largely fullfilled in the industrialized countries.learning-by-doing

Search Intensity, Directed Search And The Wage Distribution

We propose a search equilibrium model in which homogenous …rms post wages along with a vacancy to attract job-seekers, while homogenous unemployed workers invest in costly job-seeking. The key innovation relies on the organization of the search market and the search behavior of the job-seekers. The search market is continuously segmented by wage level, individuals can spread their search investment over the di¤erent sub-markets, and search intensity has marginal decreasing returns on each sub-market. We show that there exists a non-degenerate equilibrium wage distribution. The density of this wage distribution is increasing at low wages, and decreasing at high wages. Under additional restrictions, it is hump-shaped, and it can be right-tailed. Our results are illustrated by an example originating a Beta wage distribution.Search e¤ort; Segmented markets; Equilibrium wage dispersion

MATCHING WITH PHANTOMS

Searching for partners involves informational persistence that reduces future traders' matching probability. In this paper, traders that are no longer available but who left tracks on the market are called phantoms. I examine a discrete-time matching market in which phantom traders are a by-product of search activity, no coordination frictions are assumed, and non-phantom traders may lose time trying to match with phantom traders. The resulting aggregate matching technology features increasing returns to scale in the short run, but has constant returns to scale in the long run. I discuss the labor market evidence and argue that there is observational equivalence between phantom unemployed and on-the-job seekers.Endogenous matching technology; Intertemporal and intratemporal congestion externalities; Information persistence

On the spike in hazard rates at unemployment benefit expiration: The signalling hypothesis revisited

We revisit the signalling hypothesis, whereby potential employers use the duration of unemployment as a signal as to the productivity of applicants. We suggest that the quality of such a signal is very low when the unemployed receive unemployment benefits: individuals have good reasons to remain unemployed. Conversely, the signal becomes much more efficient once benefits have elapsed: skilled workers should not stay unemployed in such cases. Therefore, the potential duration of unemployment benefits should drive employers' expectations and their recruitment practices. This mechanism can explain why hazards fall after benefit expiration, and why hazards respond more to the potential duration of benefits than to replacement rates.Worker heterogeneity; Signalling; Hazard rate; Unemployment compensation; Moral hazard

FDI and the labor share in developing countries: A theory andsome evidence

This paper addresses the impact of FDI on the factor distribution of income in developing countries. We propose a theory that relies on the impacts of FDI on productive heterogeneity between firms in a frictional labor market. We argue that FDI have two opposite effects on the labor share: a negative force originated by market power and technological advance, and a positive force due to increased labor market competition between firms. Then, we test this theory on aggregate panel data through fixed effects and system-GMM estimations. We find a quantitatively meaningful U-shaped relationship between the labor share in the manufacturing sector and the ratio of FDI stock to GDP. However, most of the countries are stuck in the decreasing part of the curve,which we relate to multinationals' location choices.FDI; Matching frictions; Firm heterogeneity; Technological advance

FDI and the labor share in developing countries: a theory and some evidence

This paper addresses the impact of FDI on the labor share of income in developing countries. We propose a theory that relies on the impacts of FDI on productive heterogeneity between firms in a frictional labor market. We argue that FDI have two opposite effects on the labor share: a negative force originated by market power and technological advance, and a positive force due to increased labor market competition between firms. Then, we test this theory on aggregate panel data through fixed effects and system-GMM estimations. We find a quantitatively meaningful U- shaped relationship between the labor share in the manufacturing sector and the ratio of FDI stock to GDP. However, most of the countries are stuck in the decreasing part of the curve, which we relate to multinationals' location choices.FDI; Matching frictions; Firm heterogeneity; Technological advance

Over-education for the rich, under-education for the poor: a search-theoretic microfoundation

This paper studies the efficiency of educational choices in a two sector/two schooling level matching model of the labour market where a continuum of heterogenous workers allocates itself between sectors depending on their decision to invest in education. Individuals differ in ability and schooling cost, the search market is segmented by education, and there is free entry of new firms in each sector. Self-selection in education originates composition effects in the distribution of skills across sectors. This in turn modifies the intensity of job creation, implying the private and social returns to schooling always differ. Provided that ability and schooling cost are not too positively correlated, agents with large schooling costs — the ‘poor’ — select themselves too much, while there is too little self-selection among the low schooling cost individuals — the ‘rich’. We also show that education should be more taxed than subsidized when the Hosios condition holds.Ability; Schooling cost; Heterogeneity; Matching frictions; Efficiency

Higher education, employers’ monopsony power and the labour share in OECD countries

This paper examines the impact of higher education on the labour share. It is based on the following idea: as education offers adaptability skills, it should reduce employers’ monopsony power and, therefore, increase the labour share. This idea is developed in a two-sector model with search unemployment and wage competition between employers to attract/keep workers. Using panel data for eleven OECD countries, we show that the proportion of higher educated in the population has a significant positive effect on the labour share: typically, an increase of one standard deviation in higher education induces a three point increase in the labour share. The other determinants of the labour share are compatible with the theoretical model. They include the capital-output ratio (-), minimum to median wage ratio (+), union density (+). We also find that the unemployment rate has a negative and significant impact on the labour share, which, together with the positive impact of higher education, is incompatible with a three-factor model where factors are paid their marginal products.Search frictions; Adaptability; Labour share; Macroeconomic panel data