Equilibrium search and matching models : Theory and applications

Teacher

Prof. Bruno Van der Linden (UCL)

Objective

The objective of the course is to introduce the student to the "state of the art" in equilibrium search and matching models. These models adopt a framework in which frictions are modeled explicitly. Initially developed in partial equilibrium, this approach is nowadays more and more used in a general equilibrium setting. “In addition to labor markets, [the search and matching approach] has been applied in a great many areas in both micro and macroeconomics, including monetary economics, industrial organization, growth, public finance, and the economics of the marriage market, to name a few… Search has been used in much fairly technical theoretical work, and has been a genuine workhorse in empirical economics” (Rogerson and Wright, 2002, p. 4)
The objective is to start with an overview of search and matching models in labor economics and to proceed with applications in this field but also in public economics, macroeconomics, industrial organization, economic geography and econometrics. Other fields could be envisaged.

Structure of the course and reading list

1. Theoretical basis

Rogerson R., R. Shimer and R. Wright (2005) “Search-theoretic models of the labor market : A survey”.

Mortensen S. and C. Pissarides (1999) “New developments in models of search in the labor market” in Ashenfleter O. and D. Card (Eds.), Handbook of Labor Economics, vol. 3B, North-Holland, 2567-2627.

2. List of themes and references
(A selection has to be made taking the interest of the participants into account)

2.1 Unemployment insurance

  • Fredriksson P. and B. Holmlund (2001) “Optimal Unemployment Insurance in Search Equilibrium”, Journal of Labor Economics, 19, 370-399.
  • Acemoglu D. (2001) “Good jobs versus bad jobs”, Journal of Labor Economics, 19, 1-21.
  • Cahuc P. and F. Malherbet (2004) “Unemployment Compensation Finance and Labor Market Rigidity”, Journal of Public Economics, vol 88, pp. 481-501.

2.2 Taxation

  • Boone and Bovenberg (2002) “Optimal Labor Taxation and Search”, Journal of Public Economics, 2002.
  • Mortensen D. and C. Pissarides (2003) “Taxes, Subsidies and Equilibrium Labor Market Outcomes”, in Phelps E. (ed) Designing Inclusion: Tools to Raise Low-end Pay and Employment in Private Enterprise, Cambridge University Press.
  • Hungerbühler M., E. Lehmann , A. Parmentier.and B. Van der Linden “Optimal income taxation in an equilibrium unemployment model”, conditionally accepted by the Review of Economic Studies.

2.3 Macroeconomics & analysis of the business cycle

  • Mortensen and Pissarides (1999) “Job Reallocation, Employment Fluctuations and Unemployment” in John B. Taylor and Michael Woodford (Eds.), Handbook of Macroeconomics, vol 1 B, chapter 18.
  • Den Haan, W.J., G.Ramey, and J. Watson, 2000, “Job Destruction and Propagation of Shocks”, American Economic Review 90(3), 482-498.
  • Mortensen D. (2005) “More on Unemployment and Vacancy fluctuations”, IZA discussion paper 1765, IZA, Bonn.

2.4 Investment in Training and Schooling

  • Acemoglu D. and J. S. Pischke (1999), “Beyond Becker: Training in Imperfect Labour Markets”, Economic Journal, 109 (453), 112-142.
  • Moen E. (1999) “Education, Ranking, and Competition for jobs”, Journal of Labor Economics, 17, 694 - 723
  • Burdett and Smith (2002) “The low skill trap”, European Economic Review, 46 (8), 1439-1452.
  • Charlot O., Decreuse B. and P. Granier (2005) “Adaptability, productivity, and the incentives to schooling in a matching model”, European Economic Review, 49, 1007-1032

2.5 Industrial Organization

  • Ebell M. and Ch. Haefke (2003) “Product Market Deregulation and Labor Market Outcomes“, IZA discussion paper 957. IZA, Bonn.

2.6 Economic geography

  • Wasmer E. and Y. Zenou (2004) “Equilibrium search unemployment with explicit spatial frictions”; CEPR discussion paper 4743.

2.7 Econometrics

  • van den Berg G. (1999) “Empirical inference with equilibrium search models of the labour market”, The Economic Journal, 109, F 283-F 306.
  • Ridder G. and van den Berg G. (2003) “Measuring labor market frictions: A cross-country comparison”, Journal of the European Economic Association, 1, 224 – 244.
  • Cahuc P., Postel-Vinay F. and Jean-Marc Robin (2004) “Wage bargaining with on-the-job search: A structural econometric model”.
| 7/04/2008 |