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October 2005

Volume 113, Number 5
[Journal of Political Economy, 2005, vol. 113, no. 5]
0022-3808/2005/11305-0003$10.00
DOI: 10.1086/444551

The Assignment of Workers to Jobs in an Economy with Coordination Frictions

Robert Shimer

University of Chicago

This paper studies the assignment of heterogeneous workers to heterogeneous jobs. Owing to the anonymity of a large labor market, workers use mixed strategies when applying for jobs. This randomness generates coordination frictions. Two workers may apply for a particular job, whereas an identical job gets no applications. The model generates assortative matching, with a positive but imperfect correlation between matched workers’ and firms’ types. It predicts that a worker’s wage is increasing in her job’s productivity and a firm’s profit is increasing in its employees’ productivity. The model also yields a version of the welfare theorems.

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  • I am grateful to Jaap Abbring, Daron Acemoglu, James Heckman, Ian King, Shouyong Shi, and Chris Sims for useful discussions and to Fernando Alvarez and three anonymous referees for their detailed reports. I have also benefited from comments by numerous seminar participants. I thank the National Science Foundation and the Sloan Foundation for financial support and Sebastian Ludmer for excellent research assistance.

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