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Between Search and Walras

Author

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  • Eugene Kandel

    (Hebrew University of Jerusalem)

  • Avi Simhon

    (Hebrew University of Jerusalem)

Abstract

We present a model in which unemployed workers simultaneously sample n potential employers. By varying n, we nest search and Walrasian-type models of the labor market. We show that low values of n yield typical search equilibria: the wages are dispersed below the marginal productivity of labor. Interestingly, as n exceeds a relatively small threshold, the Walrasian-type equilibrium emerges with the competitive wage quoted by all firms. For intermediate values of n, the equilibrium is a hybrid of the Walrasian and search equilibria. The model generates wage rigidity and yields novel predictions regarding the comovement of wages, firm turnover, and unemployment.

Suggested Citation

  • Eugene Kandel & Avi Simhon, 2002. "Between Search and Walras," Journal of Labor Economics, University of Chicago Press, vol. 20(1), pages 59-85, January.
    • Handle: RePEc:ucp:jlabec:v:20:y:2002:i:1:p:59-85
    DOI: 10.1086/323932
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    References listed on IDEAS

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    1. Albrecht, James W & Axell, Bo, 1984. "An Equilibrium Model of Search Unemployment," Journal of Political Economy, University of Chicago Press, vol. 92(5), pages 824-840, October.
    2. Daron Acemoglu & Robert Shimer, 2000. "Wage and Technology Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 67(4), pages 585-607.
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    Cited by:

    1. Charles Ka Yui Leung & Youngman Chun Fai Leong & Ida Yin Sze Chan, 2002. "TOM: Why Isn’t Price Enough?," International Real Estate Review, Global Social Science Institute, vol. 5(1), pages 91-115.
    2. Gautier, Pieter A. & Moraga-González, José L. & Wolthoff, Ronald P., 2007. "Structural Estimation of Search Intensity: Do Non-Employed Workers Search Enough?," IZA Discussion Papers 3045, Institute of Labor Economics (IZA).
    3. Bemjamin Villena-Roldan, 2009. "Aggregate Implications of Employer Search and Recruiting Selection," 2009 Meeting Papers 97, Society for Economic Dynamics.

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