TY  - RPRT
        AU  - Brown, Alessio J. G.
AU  - Merkl, Christian
AU  - Snower, Dennis J.
        TI  - An Incentive Theory of Matching
        PY  - 2009/Apr/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 4145
        UR  - https://www.iza.org/index.php/publications/dp4145
        AB  - This paper presents a theory explaining the labor market matching process through microeconomic incentives. There are heterogeneous variations in the characteristics of workers and jobs, and firms face adjustment costs in responding to these variations. Matches and separations are described through firms' job offer and firing decisions and workers' job acceptance and quit decisions. This approach obviates the need for a matching function. On this theoretical basis, we argue that the matching function is vulnerable to the Lucas critique. Our calibrated model for the U.S. economy can account for important empirical regularities that the conventional matching model cannot.
        KW  - firing
KW  - employment
KW  - unemployment
KW  - incentives
KW  - adjustment costs
KW  - matching
KW  - job offers
KW  - job acceptance
KW  - quits
        ER  -