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EFFICIENCY AND LABOR MARKET DYNAMICS IN A MODEL OF LABOR SELECTION
Author(s) -
Chugh Sanjay K.,
Merkl Christian
Publication year - 2016
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12201
Subject(s) - matching (statistics) , economics , selection (genetic algorithm) , econometrics , microeconomics , model selection , dynamics (music) , dispersion (optics) , computer science , mathematics , statistics , artificial intelligence , physics , machine learning , acoustics , optics
This article characterizes efficient labor market allocations in a labor selection model. The model's crucial aspect is cross‐sectional heterogeneity for new job contacts, which leads to an endogenous selection threshold for new hires. With cross‐sectional dispersion calibrated to microeconomic data, 40% of empirically relevant fluctuations in the job‐finding rate arise, which contrasts with results in an efficient search and matching economy. The efficient selection model's results hold in partial and general equilibrium, as well as with sequential search.