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Philipp Kircher, Department
of Economics, LSE, and CEPR E-Mail: p.kircher@lse.ac.uk Tel: +44 (0)20 7955 6128 Research Interests: Allocation of
Resources in Markets with Search Frictions; Theory; Labor |
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It is based on papers (8)
and (9)
and on the work-in-progress (14). Publications with short description
Work in Progress
Research Overview (click for publication list): Most of my work has been concerned
with two main questions. 1. How to combine search frictions (which are a sign
that markets do not immediately clear) with a notion of competition for labor
(which underlies most classical theory of labor); and 2. how heterogeneous
firms match with heterogeneous workers. My approach has been and is still
mostly theoretical, but some of my newer contributions use calibrated and
estimated data, and look at model identification. The individual publications
are listed below, and include the credit to my co-authors and to all the
prior work. Directed and Competitive Search: This literature attempts to combine search and
competition in a market game where one side - e.g., firms or stores - first
publicly post the terms of trade, and then agents from the other side - e.g.,
workers or consumers - observe the postings and decide where to go in order
to trade. Only at this stage, after wages and visiting decisions have been
made, the search frictions arise. For a general treatment of the usual
micro-foundation, see (8)
below. One important consideration
is the efficiency of the labor market. For example, should job creation be subsided
on efficiency grounds? It is trivial to improve efficiency by eliminating the
search frictions. Since this seems infeasible, the literature has focused on
efficiency in a constrained sense that assumes that the search frictions
cannot be avoided. Even constrained efficiency typically fails under random
search because the wages are determined once the worker and firms are “locked
into each other” and there is not direct competition from other firms. In
directed search, firms compete with other firms in order to get workers to
apply for their jobs. Also known as competitive search, this induces
constrained efficiency not only along the well-explored dimension of firm
entry, but also along the expansion and contraction of existing firms (even
under decreasing returns to scale, see (10)).
It still captures many stylized facts about firm dynamics and hiring in a
tractable manner. With heterogeneous workers
efficiency carries over, but only if firms can post sufficiently complicated
contracts. If workers differ in their utility of leisure, a simple wage
suffices only if the presence of one worker prevents other workers from
meeting the same firm (see (5)).
Whether this is the case is important, as it determines whether the presence
of low types affects the employment prospects of high types. If that is the
case, firms do not want to attract several worker types at once, and better
firms face an interesting problem: For the same amount of money they can
attract few talented workers or many untalented workers. They do the former
only if the complementarities in output outweigh the elasticity in terms of
their matching probability (see (6)).
A general characterization of the trade-off between more workers or better
workers in a many-to-one matching environment is developed in work in
progress (15). When the market does not
reach efficiency despite posting the terms of trade in a competitive search
manner, there are two main reasons for this. The first reason is a missing
market. This can be subtle in a search model: For example, when workers can
apply for jobs at many firms, a “market” is missing if firms cannot trade the
probability that workers apply to other firms (see (3)).
Rather than creating more markets or more complicated contracts, efficiency
is also restored if firms communicate with all their applicants after they
received their applications (in the tradition of stable matchings, see (4)).
The second reason is market power where few firms dominate the hiring market.
Here unemployment benefits restore efficiency by improving employment at
productive firms but decreasing employment overall, contrary to minimum wage
effects (see (7)).
Partially directed search: Often workers (consumers) can only see some
information, but cannot see exactly the terms of trade or the attractiveness
of the firms. Efficient allocations can still be sustained even if workers
observe only cheap-talk messages from the firms (13). Alternatively,
consumers may only see where some other consumers purchased, in which case
firms have an incentive to reward more informed (richer) consumers because
they are a credible way of attracting additional customers to the firm (see (1)).
Or workers might know about some random jobs before a costly search process
that matches them competitively, which provides a tractable framework to
discuss problems in identification of the sorting between workers and firms
and in particular problems with current fixed effects estimation strategies
(see (9)). Re-sorting when worker
ability changes: In (12) we find
patterns that suggest that workers sort themselves into the occupations that
are most suitable to their skills. Occupational mobility arises when workers
ability changes, for example because they and their employer learn that the
worker is better or worse than expected. This theory seems to be in account
with the fact that both high-paid and low-paid workers are most likely to
leave their occupations, with the former tending to change to better
occupations while the latter tends to change to worse occupations. Other work: (14) models the transmission of HIV/AIDS in an
equilibrium context and discusses which kind of changes in partner choice and
sexual behavior might offset policy interventions. New work in progress asks
whether one can separately identify risk preferences and risk perceptions in
insurance contexts. Finally, (11)
shows experimentally that people’s choices violate the independence axiom in social
settings even though we do not observe this for non-social settings, which
might be important in many situations such as voting over redistribution. (home) (last
updated: September 2011) |
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