Journal Article

Efficiency and Labor Market Dynamics in a Model of Labor Selection

International Economic Review

This paper characterizes efficient labor-market allocations in a labor selection model. The

model's crucial aspect is cross-sectional heterogeneity for new job contacts, which leads to an

endogenous selection threshold for new hires. With cross-sectional dispersion calibrated to

microeconomic data, 40 percent of empirically-relevant fluctuations in the job-finding rate arise, which contrasts with results in an efficient search and matching economy. The efficient selection model's results hold in partial and general equilibrium, as well as with sequential search.

Authors

Sanjay K. Chugh
Christian Merkl

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Publication Date
JEL Classification
E24, E32, J20