QED Working Paper Number
987
This paper contributes to the search theory of unemployment by endogenously deriving matching functions and surplus sharing rule for skilled and unskilled workers from a wage-posting game. In contrast to previous wage posting models, here both sides of the market are heterogeneous and the resulted matching function can exhibit non-constant returns to scale. The model provides useful explanations for the observed dynamic patterns of within-skill and between-skill wage differentials in the 1970s and 1980s.
Keywords
Wage differential
Matching
Wage posting
Technological progress
Working Paper
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