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Scale effects in markets with search

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  • Petrongolo, Barbara
  • Pissarides, Christopher

Abstract

Reduced-form tests of scale effects in markets with search, based on aggregate matching functions, may miss important scale effects at the micro level, because of the reactions of job searchers. We estimate a semi-structural model on a British sample of unemployed people, testing for scale effects on the offer arrival rate and the wage offer distribution. We find scale effects in wage offers but not in offer arrival rates. We also find that reservation wages rise to deliver higher post-unemployment wages but not faster matches, so aggregate matching functions are unaffected by scale.

Suggested Citation

  • Petrongolo, Barbara & Pissarides, Christopher, 2006. "Scale effects in markets with search," LSE Research Online Documents on Economics 2467, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:2467
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    References listed on IDEAS

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    More about this item

    Keywords

    Job search; economies of scale; matching; aggregate matching functions; wage offer distribution; unemployment;
    All these keywords.

    JEL classification:

    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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