Kybernetika 52 no. 6, 866-897, 2016

Equilibrium search model with endogenous growth rate of human capital

Wansheng Tang, Chi Zhou, Chaoqun Xiao and Ruiqing ZhaoDOI: 10.14736/kyb-2016-6-0866

Abstract:

This article studies an equilibrium search problem when jobs provided by firms can be either unskilled or skilled and when workers differing in their education level can be either low-educated or high-educated. The structure proportion of jobs affects the equilibrium which indicates a threshold that can distinguish whether the equilibrium is separating or cross-skill. In addition, the cross-skill equilibrium solution implies the high-educated workers are more likely to obtain higher pay rates than the low-educated workers with same tenure. Moreover, the profits of the firms decrease as the number of the low-educated workers increases. The most interesting conclusion is that the growth rate of the human capital is an endogenous variable which is different from previous work.

Keywords:

dynamic programming, contracts, job search, market equilibrium, human capital

Classification:

49L20, 90C39, 91B40, 97M40

paper.pdf

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