Essays on the macroeconomics of the labor markets

In Chapter 1, I study the efficiency properties of competitive search equilibria in economies with informational asymmetries. Employers and workers are both risk-neutral and ex-ante homogeneous. I characterize an equilibrium where employers post contracts and workers direct their search towards them. When a match is formed, the disutility of labor is drawn randomly and observed privately by the worker. An employment contract is an incentive-compatible mechanism that satisfies a participation constraint on the worker's side. I first show that in a static setting the competitive search equilibrium is constrained efficient, that is, it cannot be Pareto improved by a Social Planner subject to the same informational and participation constraints faced by the decentralized economy. I then show that in a dynamic setting, on the contrary, the equilibrium can be constrained inefficient. The crucial difference between the static and the dynamic environment is that the worker's outside option is exogenously given in the former, while in the latter it is endogenously determined as the equilibrium continuation utility of unemployed workers. Inefficiency arises because the worker's outside option affects the ex-ante cost of information revelation, generating a novel externality which is not internalized by competitive search.

Department dc:contributor.department

Massachusetts Institute of Technology. Dept. of Economics.

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2006

Author dc:creator

• Guerrieri, Veronica

Advisor dc:contributor.advisor

• Daron Acemoglu and Iván Werning.

• Economics.

Statement dc:rights

• M.I.T. theses are protected by copyright. They may be viewed from this source for any purpose, but reproduction or distribution in any format is prohibited without written permission. See provided URL for inquiries about permission.

Licence dc:rights.uri

• http://dspace.mit.edu/handle/1721.1/7582

Language dc:language.iso

eng

Handle dc:identifier.uri

http://hdl.handle.net/1721.1/34658

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/34658