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Frictional Assignment

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Author Info
Shouyong Shi () (Center for Research on Economic Fluctuations and Employment and Queen's University)

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Abstract

This paper examines the time-consuming process of matching the two sides of a market each having diverse characteristics. This is cast in a labor market setting where workers of different skills need be matched with different machine qualities to produce output. I characterize the efficient allocation and then show that it can be decentralized by a competitive framework. A prominent feature of the frictional assignment is that each skill level is associated with a market tightness in addition to a machine quality. The differential market tightness as an additional allocative device implies that the assignment is not always positively assortative, i.e., high quality machines are not necessarily assigned to high skills even though machine qualities and skills are complementary in production. The market mechanism that decentralizes the efficient assignment has the feature that firms post wages to attract workers in addition to choosing machine qualities. A steady state is established and numerical exercices are used to show that the differential market tightness for different skills is also quantitatively important for the wage function and wage distribution.

Ce papier étudie le processus coûteux en temps d'appariement des deux côtés du marché, chacun ayant des caractéristiques diverses. Ceci est placé dans un marché du travail où les travailleurs ont des qualifications qui doivent être appariées avec différents qualités de machine pour la production. Je caractérise l'allocation efficace puis montre qu'elle peut être décentralisée dans un cadre concurrentiel. Un trait saillant de l'assignation frictionnelle est que chaque niveau de qualification est associé à un degré d'étroitesse du marché en plus d'une qualité de machine. L'étroitesse du marché différenciée en tant qu'instrument supplémentaire d'allocation implique que l'assignation n'est pas toujours positivement assortative, par exemple que des machines de haute qualité ne sont pas nécessairement assignées à des travailleurs hautement qualifiés malgré que qualité et qualification soient complémentaires dans la production. Le mécanisme de marché qui décentralise l'assignation efficace a la particularité que la firme affiche des salaires qui attirent des travailleurs en plus de choisir les qualités de machine. Un état stationnaire est établi et des exercices numériques sont utilisés pour montrer que le différentiel d'étroitesse du marché pour les différentes qualifications est également quantitativement important pour la fonction de salaire et la distribution des salaires.

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File URL: http://www.unites.uqam.ca/eco/CREFE/cahiers/cah74.pdf
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Publisher Info
Paper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 74.

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Length: 41 pages
Date of creation: Nov 1998
Date of revision:
Handle: RePEc:cre:crefwp:74

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Related research
Keywords: Frictional matching; Market tightness; Skills; Machines; Wage distribution;

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Find related papers by JEL classification:
D33 - Microeconomics - - Distribution - - - Factor Income Distribution
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Boyan Jovanovic, 1998. "Vintage Capital and Inequality," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 497-530, April. [Downloadable!] (restricted)
    Other versions:
  2. Mortensen, Dale T, 1982. "Property Rights and Efficiency in Mating, Racing, and Related Games," American Economic Review, American Economic Association, vol. 72(5), pages 968-79, December. [Downloadable!] (restricted)
  3. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Blackwell Publishing, vol. 57(2), pages 279-98, April. [Downloadable!] (restricted)
  4. Benoit Julien & John Kennes & Ian King, 2000. "Bidding for Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October. [Downloadable!] (restricted)
    Other versions:
  5. Sattinger, Michael, 1995. "Search and the Efficient Assignment of Workers to Jobs," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(2), pages 283-302, May. [Downloadable!] (restricted)
  6. Acemoglu, Daron & Shimer, Robert, 1999. "Holdups and Efficiency with Search Frictions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 827-49, November.
    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Taub, Bart, 2001. "Filtering with Search," Discussion Paper Series 26256, Hamburg Institute of International Economics. [Downloadable!]
  2. Shouyong Shi, 2000. "The Research Agenda: Search Theory beyond the Matching Function," EconomicDynamics Newsletter, Review of Economic Dynamics, vol. 1(2), April. [Downloadable!]
  3. Jan Eeckhout & Philipp Kircher, 2008. "Sorting and Decentralized Price Competition," PIER Working Paper Archive 08-020, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania. [Downloadable!]
  4. John Kennes, 2004. "Competitive Auctions: Theory and Application," CAM Working Papers 2004-17, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics. [Downloadable!]
    Other versions:
  5. Robert Shimer & Lones Smith, 2001. "Matching, Search, and Heterogeneity," Advances in Macroeconomics, Berkeley Electronic Press, vol. 1(advances/), pages 1010-1010. [Downloadable!] (restricted)
  6. Gillian Hamilton & Aloysius Siow, 1999. "Marriage and Fertility in a Catholic Society: Eighteenth-Century Quebec," Working Papers siow-99-01, University of Toronto, Department of Economics. [Downloadable!]
  7. Benoit Julien & John Kennes & Ian King, 2000. "Bidding for Labor," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 3(4), pages 619-649, October. [Downloadable!] (restricted)
    Other versions:
  8. Shouyong Shi, 2002. "Frictional Assignment, Part II: Infinite Horizon and Inequality," Working Papers shouyong-02-01, University of Toronto, Department of Economics. [Downloadable!]
    Other versions:
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