Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/35443 
Year of Publication: 
2009
Series/Report no.: 
IZA Discussion Papers No. 4145
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs, and firms face adjustment costs in responding to these variations. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. This approach obviates the need for a matching function. On this theoretical basis, we argue that the matching function is vulnerable to the Lucas critique. Our calibrated model for the U.S. economy can account for important empirical regularities that the conventional matching model cannot.
Subjects: 
Matching
incentives
adjustment costs
unemployment
employment
quits
firing
job offers
job acceptance
JEL: 
E24
E32
J63
J64
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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