Implementing the Mortensen rule in a frictional labor market

Julien, Benoit, Kennes, John and King, Ian Paul (2011) Implementing the Mortensen rule in a frictional labor market. Journal of Macroeconomics, 33 1: 80-91. doi:10.1016/j.jmacro.2010.06.009

Author Julien, Benoit
Kennes, John
King, Ian Paul
Title Implementing the Mortensen rule in a frictional labor market
Journal name Journal of Macroeconomics   Check publisher's open access policy
ISSN 0164-0704
Publication date 2011-03-01
Year available 2010
Sub-type Article (original research)
DOI 10.1016/j.jmacro.2010.06.009
Open Access Status Not Open Access
Volume 33
Issue 1
Start page 80
End page 91
Total pages 12
Place of publication Amsterdam, Netherlands
Publisher Elsevier BV
Language eng
Abstract We show that, in settings where meetings can be multilateral, the allocation rule proposed by Mortensen (1982) can be relatively straightforward to implement: as a local auction conducted by sellers. The implications of using this mechanism in a simple model of the labor market are then explored. We characterize the equilibrium properties of this model, which include wage dispersion, and examine its implied Beveridge curve. A dynamic version of the model is calibrated to the US labor market, and we show that the model can account for observed vacancy rates, given parameters that are chosen to match the average wages and the natural rate of unemployment, although the implied wage dispersion is quite small. Finally, in the limit, as the time between offer rounds in the model approaches zero, the equilibrium approaches the Walrasian competitive equilibrium.
Keyword Matching
Unemployment theory
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status Non-UQ

Document type: Journal Article
Sub-type: Article (original research)
Collection: School of Economics Publications
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