Working Paper: CEPR ID: DP13912
Authors: James Albrecht; Xiaoming Cai; Pieter A. Gautier; Susan Vroman
Abstract: We consider a labor market with search frictions in which workers make multiple applications and firms can post and commit to general mechanisms that may be conditioned both on the number of applications received and on the number of offers received by its candidate. When the contract space includes application fees, there exists a continuum of equilibria of which only one is socially efficient. In the inefficient equilibria, firms have market power that arises from the fact that the value of a worker's application portfolio depends on what other firms offer, which allows individual firms to free ride and offer workers less than their marginal contribution.Finally, by allowing for general mechanisms, we are able to examine the sources of inefficiency in the multiple applications literature.
Keywords: multiple applications; directed search; competing mechanisms; efficiency; market power
JEL Codes: C78; D44; D83
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| search frictions (F12) | inefficiencies (D61) |
| multiple applications (C01) | inefficiencies (D61) |
| market power (L11) | inefficiencies (D61) |
| application fees (I22) | continuum of equilibria (D50) |
| positive application fees (G29) | full match surplus for workers (J45) |
| inefficient equilibria (D59) | workers receive less than full contribution (J32) |
| wage mechanisms and number of applications (J33) | efficiency of labor market equilibrium (F16) |
| market power diminishes (L11) | extreme cases (K40) |