Sorting and the Output Loss due to Search Frictions

We analyze a general search model with on-the-job search and sorting of heterogeneous workers into heterogeneous jobs. This model yields a simple relationship between (i) the unemployment rate, (ii) the value of non-market time, and (iii) the max-mean wage differential. The latter measure of wage dispersion is more robust than measures based on the reservation wage, due to the long left tail of the wage distribution. We estimate this wage differential using data on match quality and allow for measurement error. The estimated wage dispersion and mismatch for the US is consistent with an unemployment rate of 4-6%. We find that without search frictions, output would be between 7.5% and 18.5% higher, depending on whether or not firms can ex ante commit to wage payments.on-the-job search, wage dispersion, mismatch, output loss due to frictions

The Right Man for the Job: Increasing Returns in Search?

This paper describes a search model with a continuum of worker and job types, transferable utility and an IRS contact technology. We apply a second order Taylor expansion to derive an analytical solution of the equilibrium. We find that one third of the increasing returns in contacts are absorbed by firms and workers being more choosy. Hence, strongly increasing returns in contact rates are consistent with weakly increasing returns in matching. In addition, we derive and decompose the efficiency loss due to inadequate incentives and show how unemployment benefits can reduce the loss. Finally, we derive a relation between the size of the surplus due to search frictions and the degree of substitutability of worker types at given job complexity levels. Numerical simulations of the model show that our approximations are quite accurate.

Report of the sensor cooler technology panel

The Sensor Cooler Technology Panel identified three major areas in which technology development must be supported in order to meet the system performance requirements for the Astrotech 21 mission set science objectives. They are: long life vibration free refrigerators; mechanical refrigeration for 2 K to 5 K; and flight testing of emerging prototype refrigerators. A development strategy and schedule were recommended for each of the three areas

Marriage and the City

Do people move to cities because of marriage market considerations? In cities singles can meet more potential partners than in rural areas. Singles are therefore prepared to pay a premium in terms of higher housing prices. Once married, the marriage market benefits disappear while the housing premium remains. We extend the model of Burdett and Coles (1997) with a distinction between efficient (cities) and less efficient (non-cities) search markets. One implication of the model is that singles are more likely to move from rural areas to cities while married couples are more likely to make the reverse movement. A second prediction of the model is that attractive singles benefit most from a dense market (i.e. from being choosy). Those predictions are tested with a unique Danish dataset.marriage, search, mobility, city

Sin City?

Is moving to the countryside a credible commitment device for couples? We investigate whether lowering the arrival rate of potential alternative partners by moving to a less populated area lowers the dissolution risk for a sample of Danish couples. We find that of the couples who married in the city, the ones who stay in the city have significant higher divorce rates. Similarly, for the couples who married outside the city, the ones who move to the city are more likely to divorce. This correlation can be explained by both a causal and a sorting effect. We disentangle them by using the timing-of-events approach. In addition we use information on father’s location as an instrument. We find that the sorting effect dominates. Moving to the countryside is therefore not a cheap way to prolong relationships.dissolution; search; mobility; city

On-the-Job Search and Sorting

We characterize the equilibrium of a search model with a continuum of job and worker types, wage bargaining, free entry of vacancies and on-the-job search. The decentralized economy with monopsonistic wage setting yields too many vacancies and hence too low unemployment compared to first best. This is due to a business-stealing externality. Raising workers’ bargaining power resolves this inefficiency. Unemployment benefits are a second best alternative to this policy. We establish simple relations between the losses in production due to search frictions and wage differentials on the one hand and unemployment on the other hand. Both can be used for empirical testing.