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Frontiers of Economics in China

Front. Econ. China    2015, Vol. 10 Issue (3) : 449-466
Learning and Efficiency with Search Frictions
Xi Weng()
Department of Applied Economics, Guanghua School of Management, Peking University, Beijing 100871, China
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This paper studies the allocative efficiency in a Moscarini (2005)-type equilibrium search environment with learning. It is shown that the stationary equilibrium is efficient if and only if the Hosios condition holds no matter whether learning is about firm-specific human capital or about general human capital. However, the stationary equilibrium can never be efficient if externalities exist from unemployment. In contrast, even with externalities, the stationary equilibrium can be efficient under some modified Hosios condition if there is no uncertainty (standard Mortensen and Pissarides (1994)-type equilibrium search environment). The key intuition is that the equilibrium can only be efficient if firm-worker matching is formed and terminated efficiently.

Keywords learning      efficiency      search friction      Nash bargaining      firm specific human capital      general human capital     
Issue Date: 22 October 2015
 Cite this article:   
Xi Weng. Learning and Efficiency with Search Frictions[J]. Front. Econ. China, 2015, 10(3): 449-466.
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