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  3. American Economic Journal: Microeconomics
  4. February 2016
  5. Investing in Skill and Searching for Coworkers: Endogenous Participation in a Matching Market

Investing in Skill and Searching for Coworkers: Endogenous Participation in a Matching Market

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Abstract

We demonstrate how search frictions have important yet subtle implications for participation in a skilled labor market by studying a model in which agents invest in skill prior to searching for coworkers. Search frictions induce the existence of acceptance-constrained equilibria, whereby matching concerns—as opposed to investment costs—dissuade the marginal agent from investing and participating in the skilled matching market. Such equilibria are robust, relevant, and have comparative static properties that contrast sharply with the intuitive properties arising in a benchmark static setting. We consider an extension with separate matching "marketplaces," and show that our main results continue to hold. (JEL C78, D83, J24)

Citation

Bidner, Chris, Guillaume Roger, and Jessica Moses. 2016. "Investing in Skill and Searching for Coworkers: Endogenous Participation in a Matching Market." American Economic Journal: Microeconomics, 8 (1): 166-202. DOI: 10.1257/mic.20140110

Additional Materials

JEL Classification

  • C78 Bargaining Theory; Matching Theory
  • D83 Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
  • J24 Human Capital; Skills; Occupational Choice; Labor Productivity
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