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Job-Searching and Job-Matching in a Two-Sector General Equilibrium Model

Author

Listed:
  • Bandopadhyay, Titas Kumar
Abstract
We extend the benchmark model of DMP in a two-sector general equilibrium framework by introducing a frictionless segment of the labour market. We also examine the effects of trade reforms and labour market reforms on equilibrium rate of unemployment and wage inequality in our stylitzed economy. We find that both these reforms reduce equilibrium rate of unemployment. However, trade reforms raise wage inequality but labour market reforms reduce it. These results provide a strong theoretical basis for labour market reform in a small open economy characterized by frictional labour market.

Suggested Citation

  • Bandopadhyay, Titas Kumar, 2014. "Job-Searching and Job-Matching in a Two-Sector General Equilibrium Model," MPRA Paper 59039, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:59039
    as

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    References listed on IDEAS

    as
    1. Pissarides, C A, 1979. "Job Matchings with State Employment Agencies and Random Search," Economic Journal, Royal Economic Society, vol. 89(356), pages 818-833, December.
    2. repec:bla:econom:v:47:y:1980:i:185:p:35-50 is not listed on IDEAS
    3. Dale T. Mortensen, 2011. "Markets with Search Friction and the DMP Model," American Economic Review, American Economic Association, vol. 101(4), pages 1073-1091, June.
    4. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, April.
    5. Xinpeng Xu & Yu Sheng, 2014. "Terms of Trade Shocks and Endogenous Search Unemployment: A Two-Sector Model with Non-Traded Goods," Pacific Economic Review, Wiley Blackwell, vol. 19(2), pages 201-215, May.
    6. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-690, September.
    7. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    8. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    9. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
    10. Dale T. Mortensen & Christopher A. Pissarides, 1998. "Technological Progress, Job Creation and Job Destruction," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(4), pages 733-753, October.
    11. Pissarides, C A, 1984. "Efficient Job Rejection," Economic Journal, Royal Economic Society, vol. 94(376a), pages 97-108, Supplemen.
    12. Peter A. Diamond, 1982. "Wage Determination and Efficiency in Search Equilibrium," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(2), pages 217-227.
    13. Peter A. Diamond & Eric Maskin, 1979. "An Equilibrium Analysis of Search and Breach of Contract, I: Steady States," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 282-316, Spring.
    14. Mortensen, Dale T. & Pissarides, Christopher A., 1999. "New developments in models of search in the labor market," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627, Elsevier.
    15. Margaret Stevens, 2007. "New Microfoundations For The Aggregate Matching Function," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(3), pages 847-868, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Job-searching; Job-matching; General equilibrium; Trade liberalization;
    All these keywords.

    JEL classification:

    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

    NEP fields

    This paper has been announced in the following NEP Reports:

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