Journal article

An Incentive Theory of Matching

Publication Details
Author(s): Merkl C, Snower D, Brown AJG
Publisher: Cambridge University Press (CUP)
Publication year: 2015
Volume: 19
Journal issue: 3
Pages range: 1-26
ISSN: 1365-1005
Language: English


This paper presents a theory of the labor market matching process in terms of incentive-based, two-sided search among heterogeneous agents. The matching process is decomposed into its two component stages: the contact stage, in which job searchers make contact with employers, and the selection stage, in which they decide whether to match. We construct a theoretical model explaining two-sided selection through microeconomic incentives. Firms face adjustment costs in responding to heterogeneous variations in the characteristics of workers and jobs. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. Our calibrated model for the United States can account for important empirical regularities, such as the large volatilities of labor market variables, that the conventional matching model cannot.

Focus Area of Individual Faculties

How to cite
APA: Merkl, C., Snower, D., & Brown, A.J.G. (2015). An Incentive Theory of Matching. Macroeconomic Dynamics, 19(3), 1-26.

MLA: Merkl, Christian, Dennis Snower, and Alessio J. G. Brown. "An Incentive Theory of Matching." Macroeconomic Dynamics 19.3 (2015): 1-26.

BibTeX: Download
Share link
Last updated on 2017-09-22 at 03:25
PDF downloaded successfully