Discussion Paper

No. 2013-40 | August 07, 2013
Endogenous Ranking in a Two-Sector Urn-Ball Matching Process

Abstract

This paper contributes to the debate concerning the micro-foundation of matching functions in frictional labor markets. The focus is on a particular matching regime, i.e., the so-called urn-ball process. It is shown that in a two-sector economy, even in the presence of heterogeneous workers, the assumption of applicants-ranking may be misleading. Instead, the choice concerning the adoption of either ranking or no-ranking behavior is endogenous and it is affected by both the tightness of the two sectors and the composition of the labor force in terms of skills. Moreover it is proved that exogenous shocks may change the form of the matching function. This result casts additional doubts on the assumption of exogenous matching functions often made in empirical works aimed at assessing the effectiveness of policy measures.

JEL Classification

J63 J64

Cite As

Giuseppe Rose (2013). Endogenous Ranking in a Two-Sector Urn-Ball Matching Process. Economics Discussion Papers, No 2013-40, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2013-40

Assessment



Comments and Questions


Stijn Baert - Appreciation
August 08, 2013 - 15:58

I read this study and I believe it is really hiqh-quality work; an insightful contribution!


Anonymous - referee report 1
September 02, 2013 - 09:24

see attached file


Giuseppe Rose - Response to referee report 1
October 07, 2013 - 11:27

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Anonymous - referee report 2
September 02, 2013 - 09:26

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Giuseppe Rose - Response to referee report 2
October 07, 2013 - 11:29

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Anonymous - Referee report 3
September 17, 2013 - 08:51

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Giuseppe Rose - Response to referee report 3
October 07, 2013 - 11:30

see attached file


Anonymous - Referee report 4
November 21, 2013 - 08:40

see attached file