Discussion paper

DP3044 A Discrete-Time Stochastic Model of Job Matching

In this Paper, an explicit micro scenario is developed which yields a well-defined aggregate job-matching function. In particular, a stochastic model of job-matching behaviour is constructed in which the system steady state is shown to be approximated by an exponential-type matching function, as the population becomes large. This steady-state approximation is first derived for fixed levels of both wages and search intensities, where it is shown (without using a free-entry condition) that there exists a unique equilibrium. It is then shown that if job searchers are allowed to choose their search intensities optimally, then this model is again consistent with a unique steady state. Finally, the assumption of a fixed wage is relaxed, and an optimal ?offer wage? is derived for employers.


Zenou, Y and T Smith (eds) (2001), “DP3044 A Discrete-Time Stochastic Model of Job Matching”, CEPR Press Discussion Paper No. 3044. https://cepr.org/publications/dp3044