Search, Applications and Vacancies
Over the last few years the efficiency of search equilibria has been examined by a number of authors. In a series of papers, Diamond (1981; 1982a; 1982b; 1984) has studied this issue in depth. Diamond (1981) shows that in a market with a distribution of match specific mobility costs, an unemployment insurance programme can improve the ex ante welfare of all workers by inducing each of them to forego opportunities with high mobility costs. Diamond (1982b) shows that in a market with no competition among agents, there are multiple equilibria, all of which are Pareto inefficient. The inefficiency occurs because no agent internalizes the value of his increased search activity to other searchers. Diamond and Maskin (1979; 1981), and Mortensen (1981; 1982a; 1982b) show in matching models that the characteristics of the inefficiencies in equilibrium depend upon the search technology. With the exception of Mortensen (1981), (1982a) none of these models allows for contemporaneous competition among searchers.
KeywordsNash Equilibrium Unemployment Insurance Social Planner Unemployed Worker Search Intensity
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