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Directed search with heterogeneous firms: an experimental study

Published online by Cambridge University Press:  14 March 2025

Andrew Kloosterman
Andrew Kloosterman*
Affiliation:
Department of Economics, University of Virginia, P.O. Box 400182, Charlottesville, VA 22904-4182, USA
*
ask5b@virginia.edu
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Abstract

Directed search models labor markets where workers observe wages before deciding where they will apply. This paper tests this model for the case of heterogeneous firms in a laboratory experiment. The theory predicts that more productive firms offer higher wages and workers apply more often to these higher wages. In consequence, more productive firms are more likely to match and the market is more efficient than the prediction of an alternative model where search is random. The main results of the experiment are that average firms offer wages that are close to or a little lower than the theoretical predictions but highly variable and workers apply more often to high offers but not to the extent predicted. The markets are no more efficient than random search predicts, because of the variation in wage offers.

Keywords

Directed searchExperimental economicsHeterogeneous productivity

JEL classification

J64: Unemployment: Models, Duration, Incidence, and Job SearchC92: Laboratory, Group Behavior

Information

Type
Original Paper
Information
Experimental Economics , Volume 19 , Issue 1 , March 2016, pp. 51 - 66
Copyright
Copyright © 2015 Economic Science Association

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Footnotes

Electronic supplementary material The online version of this article (doi:https://doi.org/10.1007/s10683-014-9426-8) contains supplementary material, which is available to authorized users.

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