Search, Unemployment, and the Production of Jobs
The authors investigate the performance of the economy when search is required to find employment and when the duration of unemployment varies across sectors. They assume that in one sector factor markets are frictionless, while in the other se ctor idle factors of production must actively search each other out i n order to produce. They focus on how well the economy allocates work ers across sectors and the conditions under which the factor mix with in a sector is correct. The authors demonstrate that in equilibrium t he search sector is too small and its factor intensity is too asymmet ric. Copyright 1987 by Royal Economic Society.