Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70547
Authors: 
Veracierto, Marcelo
Year of Publication: 
2007
Series/Report no.: 
Working Paper, Federal Reserve Bank of Chicago 2007-16
Abstract: 
This paper develops a Walrasian equilibrium theory of establishment level dynamics and matching frictions and uses it to evaluate the effects of congestion externalities in the matching process and determine the government interventions that are needed to implement a Pareto optimal allocation. The optimal policy, which involves a tax on the creation of help-wanted ads and an unemployment subsidy, is highly contractionary. However, it leads to large welfare gains. The policy also plays an important role in dampening the response of the economy to aggregate productivity shocks.
Subjects: 
firm dynamics
matching
unemployment
business cycles
JEL: 
E32
J63
J64
Document Type: 
Working Paper

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