Essays on matching models of the labour market
This thesis is divided into three parts, all related to matching models of the labour market. In the first part, I analyze wage determination in search equilibrium. In the second part, I study human capital acquisition and depreciation when the labour market contains frictions. In the last part, I discuss various issues related to search and matching. Below follows a brief description of each paper. Part 1: Wage Determination In A Matching Model with Wage Announcement, I study a matching model where heterogeneous firms publicly announce wage offers. I derive a Walrasian type of equilibrium, which is constrained efficient. In Bargaining Over the Business Cycle, I assume that wages are determined by strategic bargaining. This makes wages more and unemployment less volatile than when the conventional Nash solution is applied. In Bargaining and Matching, I design an alternative extensive form bargaining game, where a third agent may arrive and Bertrand competition take place. The resulting wage schedule is of the same form as the one that prevails from Nash bargaining. Part 2. Human Capital and Matching In Human Capital Investments and Market Imperfections, I analyze how frictions in the labour market can distort the incentives to invest in human capital, and lead to sub-optimal investments and multiple equilibria. In Education and Competition for Jobs, each vacancy can get more than one applicant, and several workers may compete for the same job. Depending on parameter values, workers may or may not diversify and choose different levels of education. In Loss of Skills During Unemployment, workers gradually lose skills during unemployment. As a result, multiple equilibria may exist, and unemployment benefits to the long-term unemployed can reduce unemployment. Part 3. Other Topics In Optimal Unemployment, I study the efficiency of matching models using techniques from optimal control theory. In A Search Model with Hiring Costs, I introduce hiring costs in the model, and show that this makes the vacancy rate less volatile and the adjustment process after a shock smoother.