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Specialization and efficiency with labor-market matching

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  • Mukoyama, Toshihiko
  • Sahin, Aysegül

Abstract

This paper constructs a labor-market matching model with heterogeneous workers. Due to matching frictions, there may be a mismatch of talents within a production team, forcing a worker to specialize in a task at which she is not talented. We consider a partnership model where production takes place in teams consisting of two workers. We characterize the steady-state of the matching equilibrium. The constrained efficiency of the matching equilibrium depends on the distribution of talents. The constrained-efficient allocation can always be implemented by a type-specific tax. We also examine an alternative model with Diamond-Mortensen-Pissarides type matching between firms and workers.

Suggested Citation

  • Mukoyama, Toshihiko & Sahin, Aysegül, 2009. "Specialization and efficiency with labor-market matching," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 221-236, January.
    • Handle: RePEc:eee:dyncon:v:33:y:2009:i:1:p:221-236
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    References listed on IDEAS

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    1. Alexiadis, Stilianos & Eleftheriou, Konstantinos & Nijkamp, Peter, 2013. "Technology adoption within a search model: Evidence from OECD countries," Economic Modelling, Elsevier, vol. 33(C), pages 137-148.

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