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Search and matching theory (economics)

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60: 1308:, then to calculate the change in employment from one period to the next we must add the formation of new matches and subtract off the separation of old matches. A period may be treated as a week, a month, a quarter, or some other convenient period of time, depending on the data under consideration. (For simplicity, we are ignoring the entry of new workers into the labor force, and the death or retirement of old workers, but these issues can be accounted for as well.) Suppose we write the number of workers employed in period 819: 831: 1247:. However, whereas a production function usually represents the production of goods and services from inputs like labor and capital, a matching function represents the formation of new relationships from the pools of available unmatched individuals. Estimates of the labor market matching function suggest that it has 905:
outcome when one or more types of searchers interact. It offers a way of modeling markets in which frictions prevent instantaneous adjustments of the level of economic activity. Among other applications, it has been used as a framework for studying
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as a fixed constant. But the fraction of workers separating per period of time can be determined endogenously if we assume that the value of being matched varies over time for each worker-firm pair (due, for example, to changes in
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Economic Prize Committee of the Royal Swedish Academy of Sciences, 'The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 2010'
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A matching function is a mathematical relationship that describes the formation of new relationships (also called 'matches') from unmatched
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is a mathematical framework attempting to describe the formation of mutually beneficial relationships over time. It is closely related to
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of the appropriate types. For example, in the context of job formation, matching functions are sometimes assumed to have the following '
1446: 893:, where it has been used to describe the formation of new jobs. Search and matching theory evolved from an earlier framework called ' 1602:, but some economists have recently questioned its quantitative accuracy. While unemployment exhibits large fluctuations over the 395: 171: 1683: 950: 854: 2010: 1933: 532: 380: 1755:
Mortensen, Dale; Pissarides, Christopher (1994). "Job creation and job destruction in the theory of unemployment".
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has demonstrated that standard versions of matching models predict much smaller fluctuations in unemployment.
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Matching theory has been widely accepted as one of the best available descriptions of the frictions in the
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firms are trying to fill. The number of new relationships (matches) created (per unit of time) is given by
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If the fraction of jobs that separate (due to firing, quits, and so forth) from one period to the next is
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represents the number of unemployed job seekers in the economy at a given time
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decision of an individual searcher, search and matching theory studies the
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Formation of jobs, from unemployed workers and vacancies opened by firms
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Matching theory has been applied in many economic contexts, including:
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The role of money in facilitating sales when sellers and buyers meet
921:. A textbook treatment of the matching approach to labor markets is 2434: 1051:{\displaystyle m_{t}\;=\;M(u_{t},v_{t})\;=\;\mu u_{t}^{a}v_{t}^{b}} 1534:{\displaystyle n_{t+1}\;=\mu u_{t}^{a}v_{t}^{b}+(1-\delta )n_{t}} 1712:"Looking into the black box: a survey of the matching function" 937:
for 'fundamental contributions to search and matching theory'.
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Search and matching theory has been especially influential in
1846:(1993). "A search-theoretic approach to monetary economics". 422: 198: 1911: 1797:"Liquidity flows and the fragility of business enterprises" 1710:
Petrongolo, Barbara; Pissarides, Christopher (2001).
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One of the founders of search and matching theory is
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Where search theory studies the 27:Mathematical framework in economics 24: 25: 3053: 2469:neoclassical–Keynesian synthesis 1674:Pissarides, Christopher (2000). 829: 817: 58: 18:Matching theory (macroeconomics) 1676:Equilibrium Unemployment Theory 1574: 927:Equilibrium Unemployment Theory 34:approach in applied statistics. 1868: 1832: 1785: 1719:Journal of Economic Literature 1703: 1692: 1593: 1518: 1506: 1007: 981: 777:Publications in macroeconomics 13: 1: 2405:Critique of political economy 1941: 1818:10.1016/S0304-3932(03)00077-1 1805:Journal of Monetary Economics 1657: 1276:{\displaystyle a+b\approx 1} 30:Not to be confused with the 7: 1678:(2nd ed.). MIT Press. 1613: 1559:{\displaystyle \,\delta \,} 1301:{\displaystyle \,\delta \,} 10: 3058: 2543:Real business-cycle theory 1758:Review of Economic Studies 880:search and matching theory 528:New neoclassical synthesis 511:Real business-cycle theory 29: 2983: 2941: 2583: 2317: 2066: 2031: 1949: 1407:{\displaystyle \,L_{t}\,} 1249:constant returns to scale 1233:{\displaystyle \,m_{t}\,} 1200:{\displaystyle \,v_{t}\,} 1149:{\displaystyle \,u_{t}\,} 923:Christopher A. Pissarides 1902:10.1257/0002828053828572 1880:American Economic Review 1849:American Economic Review 1076:{\displaystyle \,\mu \,} 935:Nobel Prize in Economics 933:, were awarded the 2010 533:Saltwater and freshwater 2183:Industrial organization 2006:Computational economics 1646:Matching (graph theory) 919:Northwestern University 908:frictional unemployment 461:International economics 386:Overlapping generations 3037:Microeconomic theories 2388:Modern monetary theory 2053:Experimental economics 2023:Pluralism in economics 1996:Mathematical economics 1560: 1535: 1434: 1408: 1379: 1324: 1302: 1277: 1234: 1201: 1172: 1150: 1121: 1099: 1077: 1052: 884:stable matching theory 804:Mathematical economics 555:Modern monetary theory 318:Universal basic income 1561: 1536: 1435: 1433:{\displaystyle \,t\,} 1409: 1380: 1325: 1323:{\displaystyle \,t\,} 1303: 1278: 1235: 1202: 1173: 1171:{\displaystyle \,t\,} 1151: 1122: 1120:{\displaystyle \,b\,} 1100: 1098:{\displaystyle \,a\,} 1078: 1053: 941:The matching function 644:Wesley Clair Mitchell 619:Thomas Robert Malthus 456:Development economics 2262:Social choice theory 2018:Behavioral economics 2001:Complexity economics 1731:10.1257/jel.39.2.390 1641:Nash bargaining game 1548: 1447: 1422: 1389: 1334: 1312: 1290: 1255: 1215: 1182: 1160: 1131: 1109: 1087: 1065: 960: 381:Ramsey–Cass–Koopmans 221:Liquidity preference 2346:American (National) 2046:Economic statistics 1502: 1487: 1245:production function 1047: 1032: 836:Business portal 772:Macroeconomic model 649:John Maynard Keynes 446:Economic statistics 391:General equilibrium 1840:Kiyotaki, Nobuhiro 1636:Monetary economics 1556: 1531: 1488: 1473: 1430: 1404: 1375: 1320: 1298: 1273: 1230: 1197: 1168: 1146: 1117: 1095: 1073: 1048: 1033: 1018: 724:Edward C. Prescott 451:Monetary economics 3019: 3018: 2550:New institutional 1685:978-0-262-16187-9 1207:is the number of 915:Dale T. Mortensen 872: 871: 799:Political economy 754:N. Gregory Mankiw 744:Thomas J. Sargent 589:Market monetarism 403:Endogenous growth 233:National accounts 16:(Redirected from 3049: 3032:Labour economics 2223:Natural resource 2058:Economic history 1984:Mechanism design 1936: 1929: 1922: 1913: 1912: 1906: 1905: 1895: 1872: 1866: 1865: 1836: 1830: 1829: 1812:(6): 1215–1241. 1801: 1793:Haan, Wouter den 1789: 1783: 1782: 1752: 1743: 1742: 1716: 1707: 1701: 1696: 1690: 1689: 1671: 1651:Optimal matching 1565: 1563: 1562: 1557: 1540: 1538: 1537: 1532: 1530: 1529: 1501: 1496: 1486: 1481: 1465: 1464: 1439: 1437: 1436: 1431: 1413: 1411: 1410: 1405: 1402: 1401: 1384: 1382: 1381: 1376: 1373: 1372: 1360: 1359: 1347: 1346: 1329: 1327: 1326: 1321: 1307: 1305: 1304: 1299: 1282: 1280: 1279: 1274: 1239: 1237: 1236: 1231: 1228: 1227: 1206: 1204: 1203: 1198: 1195: 1194: 1177: 1175: 1174: 1169: 1155: 1153: 1152: 1147: 1144: 1143: 1126: 1124: 1123: 1118: 1104: 1102: 1101: 1096: 1082: 1080: 1079: 1074: 1057: 1055: 1054: 1049: 1046: 1041: 1031: 1026: 1006: 1005: 993: 992: 972: 971: 931:Peter A. Diamond 864: 857: 850: 834: 833: 824:Money portal 822: 821: 820: 734:William Nordhaus 719:Robert Lucas Jr. 609:François Quesnay 245:Nominal rigidity 216:Demand for money 194:Microfoundations 130:Financial crisis 110:Effective demand 80:Aggregate supply 75:Aggregate demand 62: 39: 38: 21: 3057: 3056: 3052: 3051: 3050: 3048: 3047: 3046: 3022: 3021: 3020: 3015: 3012:Business portal 2979: 2978: 2977: 2937: 2701:von Böhm-Bawerk 2589: 2588: 2579: 2351:Ancient thought 2329: 2328: 2322: 2313: 2312: 2311: 2062: 2027: 1979:Contract theory 1964:Decision theory 1945: 1940: 1910: 1909: 1893:10.1.1.422.8639 1873: 1869: 1844:Wright, Randall 1837: 1833: 1799: 1790: 1786: 1771:10.2307/2297896 1753: 1746: 1714: 1708: 1704: 1697: 1693: 1686: 1672: 1665: 1660: 1655: 1631:Labor economics 1626:Beveridge curve 1616: 1596: 1577: 1549: 1546: 1545: 1525: 1521: 1497: 1492: 1482: 1477: 1454: 1450: 1448: 1445: 1444: 1423: 1420: 1419: 1397: 1393: 1390: 1387: 1386: 1368: 1364: 1355: 1351: 1342: 1338: 1335: 1332: 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2249: 2246: 2244: 2241: 2239: 2236: 2234: 2233:Participation 2231: 2229: 2226: 2224: 2221: 2219: 2216: 2214: 2211: 2209: 2206: 2204: 2201: 2199: 2196: 2194: 2193:Institutional 2191: 2189: 2186: 2184: 2181: 2179: 2176: 2174: 2171: 2169: 2166: 2164: 2161: 2159: 2156: 2154: 2151: 2149: 2146: 2144: 2143:Expeditionary 2141: 2139: 2136: 2134: 2133:Environmental 2131: 2129: 2126: 2124: 2121: 2119: 2116: 2114: 2111: 2109: 2106: 2104: 2101: 2099: 2096: 2094: 2091: 2089: 2086: 2084: 2081: 2079: 2076: 2075: 2071: 2069: 2065: 2059: 2056: 2054: 2051: 2047: 2044: 2043: 2042: 2039: 2038: 2036: 2034: 2030: 2024: 2021: 2019: 2016: 2012: 2009: 2008: 2007: 2004: 2002: 1999: 1997: 1994: 1992: 1989: 1985: 1982: 1980: 1977: 1975: 1972: 1970: 1967: 1965: 1962: 1961: 1960: 1957: 1956: 1954: 1952: 1948: 1944: 1937: 1932: 1930: 1925: 1923: 1918: 1917: 1914: 1903: 1899: 1894: 1889: 1885: 1881: 1877: 1871: 1863: 1859: 1855: 1851: 1850: 1845: 1841: 1835: 1827: 1823: 1819: 1815: 1811: 1807: 1806: 1798: 1794: 1788: 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825: 815: 814: 813: 812: 805: 802: 800: 797: 795: 792: 788: 785: 784: 783: 780: 778: 775: 773: 770: 769: 763: 762: 755: 752: 750: 747: 745: 742: 740: 737: 735: 732: 730: 729:Peter Diamond 727: 725: 722: 720: 717: 715: 714:Edmund Phelps 712: 710: 707: 705: 702: 700: 697: 695: 692: 690: 689:Richard Stone 687: 685: 682: 680: 677: 675: 674:Joan Robinson 672: 670: 669:Simon Kuznets 667: 665: 664:Gunnar Myrdal 662: 660: 657: 655: 652: 650: 647: 645: 642: 640: 639:Irving Fisher 637: 635: 634:Knut Wicksell 632: 630: 627: 625: 622: 620: 617: 615: 612: 610: 607: 606: 603: 598: 597: 590: 587: 585: 582: 580: 577: 573: 570: 569: 568: 565: 563: 560: 556: 553: 552: 551: 548: 546: 543: 542: 541: 540: 534: 531: 529: 526: 524: 521: 519: 516: 512: 509: 508: 507: 506:New classical 504: 502: 499: 495: 492: 490: 487: 486: 485: 482: 481: 480: 475: 470: 469: 462: 459: 457: 454: 452: 449: 447: 444: 442: 439: 438: 432: 431: 424: 421: 419: 416: 414: 411: 409: 406: 404: 401: 397: 394: 393: 392: 389: 387: 384: 382: 379: 377: 374: 372: 369: 367: 364: 362: 359: 357: 354: 352: 349: 347: 344: 342: 339: 337: 334: 333: 327: 326: 319: 316: 314: 311: 309: 306: 304: 301: 299: 296: 295: 289: 288: 281: 278: 276: 273: 271: 268: 266: 263: 261: 260:Shrinkflation 258: 256: 253: 251: 248: 246: 243: 239: 236: 235: 234: 231: 229: 226: 222: 219: 218: 217: 214: 212: 209: 205: 202: 201: 200: 197: 195: 192: 188: 185: 183: 180: 178: 175: 174: 173: 170: 168: 165: 163: 160: 158: 157:Interest rate 155: 151: 148: 146: 143: 142: 141: 138: 136: 133: 131: 128: 124: 121: 119: 116: 115: 114:Expectations 113: 111: 108: 106: 103: 101: 98: 96: 93: 91: 88: 86: 83: 81: 78: 76: 73: 72: 66: 65: 61: 57: 56: 53: 50: 49: 45: 41: 40: 37: 33: 19: 3007:Publications 2963:Publications 2930: 2526:Neoclassical 2516:Mercantilism 2425:Evolutionary 2287:Sociological 2260: / 2158:Geographical 2138:Evolutionary 2113:Digitization 2078:Agricultural 2041:Econometrics 1969:Price theory 1886:(1): 25–49. 1883: 1879: 1870: 1856:(1): 63–77. 1853: 1847: 1834: 1809: 1803: 1787: 1762: 1756: 1722: 1718: 1705: 1694: 1675: 1600:labor market 1597: 1578: 1575:Applications 1569:productivity 1543: 1285: 1242: 1060: 951:Cobb–Douglas 944: 926: 912: 888: 879: 873: 749:Paul Krugman 694:Hyman Minsky 654:Alvin Hansen 538: 537: 478: 441:Econometrics 418:Overshooting 371:Harrod–Domar 366:Arrow–Debreu 313:Central bank 280:Unemployment 270:Supply shock 228:Money supply 105:Disinflation 100:Demand shock 36: 2801:von Neumann 2570:Supply-side 2555:Physiocracy 2499:Marginalism 2188:Information 2128:Engineering 2108:Development 2103:Demographic 1974:Game theory 1951:Theoretical 1594:Controversy 1416:labor force 1251:, that is, 1209:vacant jobs 629:LĂ©on Walras 523:Supply-side 356:Accelerator 265:Stagflation 250:Price level 145:Demand-pull 3026:Categories 2958:Economists 2831:Schumacher 2736:Schumpeter 2706:von Wieser 2626:von ThĂĽnen 2586:Economists 2485:Circuitism 2450:Humanistic 2445:Historical 2420:Ecological 2410:Democratic 2383:Chartalism 2373:Behavioral 2336:Mainstream 2297:Statistics 2292:Solidarity 2213:Managerial 2178:Humanistic 2173:Historical 2118:Ecological 2083:Behavioral 1658:References 1418:in period 684:John Hicks 614:Adam Smith 572:Circuitism 562:Ecological 550:Chartalism 501:Monetarism 479:Mainstream 376:Solow–Swan 351:Multiplier 308:Commercial 204:Endogenous 162:Investment 2876:Greenspan 2841:Samuelson 2821:Galbraith 2791:Tinbergen 2731:von Mises 2726:Heckscher 2686:Edgeworth 2565:Stockholm 2560:Socialist 2460:Keynesian 2440:Happiness 2400:Classical 2361:Mutualism 2356:Anarchist 2341:Heterodox 2238:Personnel 2198:Knowledge 2163:Happiness 2153:Financial 2123:Education 2098:Democracy 2033:Empirical 1943:Economics 1888:CiteSeerX 1553:δ 1516:δ 1513:− 1471:μ 1362:− 1295:δ 1268:≈ 1070:μ 1016:μ 876:economics 782:Economics 624:Karl Marx 539:Heterodox 518:Stockholm 484:Keynesian 255:Recession 150:Cost-push 140:Inflation 95:Deflation 2987:Category 2967:journals 2953:Glossary 2906:Stiglitz 2871:Rothbard 2851:Buchanan 2836:Friedman 2826:Koopmans 2816:Leontief 2796:Robinson 2681:Marshall 2531:Lausanne 2435:Georgism 2430:Feminist 2378:Buddhist 2368:Austrian 2267:Regional 2243:Planning 2218:Monetary 2148:Feminist 2093:Cultural 2088:Business 1826:10864047 1614:See also 1385:, where 953:' form: 766:See also 545:Austrian 303:Monetary 292:Policies 123:Rational 118:Adaptive 44:a series 42:Part of 32:matching 3002:Outline 2973:Schools 2965: ( 2926:Piketty 2921:Krugman 2786:Kuznets 2776:Kalecki 2751:Polanyi 2641:Cournot 2636:Bastiat 2621:Ricardo 2611:Malthus 2601:Quesnay 2504:Marxian 2395:Chicago 2325:history 2320:Schools 2307:Welfare 2277:Service 2068:Applied 1862:2117496 1779:2297896 1739:2698244 1414:is the 925:' book 787:Applied 584:Marxian 474:Schools 2911:Thaler 2891:Ostrom 2886:Becker 2881:Sowell 2861:Baumol 2766:Myrdal 2761:Sraffa 2756:Frisch 2746:Knight 2741:Keynes 2716:Fisher 2711:Veblen 2696:Pareto 2676:Menger 2671:George 2666:Jevons 2661:Walras 2651:Gossen 2575:Thermo 2253:Public 2248:Policy 2203:Labour 2168:Health 1890:  1860:  1824:  1777:  1737:  1682:  1178:, and 1105:, and 1061:where 947:agents 602:People 330:Models 298:Fiscal 275:Saving 135:Growth 2997:Lists 2992:Index 2943:Lists 2916:Hoppe 2901:Lucas 2866:Solow 2856:Arrow 2846:Simon 2811:Lange 2806:Hicks 2781:Röpke 2771:Hayek 2721:Pigou 2691:Clark 2606:Smith 2521:Mixed 2480:Post- 2302:Urban 2282:Socio 2272:Rural 1858:JSTOR 1822:S2CID 1800:(PDF) 1775:JSTOR 1735:JSTOR 1715:(PDF) 423:NAIRU 341:AD–AS 336:IS–LM 199:Money 2932:more 2656:Marx 2646:Mill 2631:List 2509:Neo- 2465:Neo- 1680:ISBN 489:Neo- 396:DSGE 90:CAGR 2896:Sen 2616:Say 2475:New 2208:Law 1898:doi 1814:doi 1767:doi 1727:doi 1571:). 1330:as 917:of 886:. 874:In 494:New 238:SNA 187:NNI 182:GNI 177:GDP 3028:: 1896:. 1884:95 1882:. 1854:83 1852:. 1842:; 1820:. 1810:50 1808:. 1802:. 1773:. 1763:61 1761:. 1747:^ 1733:. 1723:39 1721:. 1717:. 1666:^ 1606:, 1283:. 1240:. 1083:, 910:. 878:, 46:on 2969:) 2471:) 2467:( 2327:) 2323:( 1935:e 1928:t 1921:v 1904:. 1900:: 1864:. 1828:. 1816:: 1781:. 1769:: 1741:. 1729:: 1688:. 1527:t 1523:n 1519:) 1510:1 1507:( 1504:+ 1499:b 1494:t 1490:v 1484:a 1479:t 1475:u 1468:= 1462:1 1459:+ 1456:t 1452:n 1427:t 1399:t 1395:L 1370:t 1366:u 1357:t 1353:L 1349:= 1344:t 1340:n 1317:t 1271:1 1265:b 1262:+ 1259:a 1225:t 1221:m 1192:t 1188:v 1165:t 1141:t 1137:u 1114:b 1092:a 1044:b 1039:t 1035:v 1029:a 1024:t 1020:u 1012:= 1008:) 1003:t 999:v 995:, 990:t 986:u 982:( 979:M 975:= 969:t 965:m 863:e 856:t 849:v 20:)

Index

Matching theory (macroeconomics)
matching
a series
Macroeconomics
Federal Reserve
Aggregate demand
Aggregate supply
Business cycle
CAGR
Deflation
Demand shock
Disinflation
Effective demand
Adaptive
Rational
Financial crisis
Growth
Inflation
Demand-pull
Cost-push
Interest rate
Investment
Liquidity trap
Measures of national income and output
GDP
GNI
NNI
Microfoundations
Money
Endogenous

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