Matching Theory
More recently, job search, and other types of search, have been incorporated into macroeconomic models, using a framework called 'matching theory'. Peter A. Diamond, Dale Mortensen, and Christopher A. Pissarides won the 2010 Nobel prize in economics for their work on matching theory.
In models of matching in the labor market, two types of search interact. That is, the rate at which new jobs are formed is assumed to depend both on workers' search decisions, and on firms' decisions to open job vacancies. While some matching models include a distribution of different wages, others are simplified by ignoring wage differences, and just imply that workers pass through an unemployment spell of random length before beginning work.
Read more about this topic: Search Theory
Famous quotes containing the word theory:
“A theory of the middle class: that it is not to be determined by its financial situation but rather by its relation to government. That is, one could shade down from an actual ruling or governing class to a class hopelessly out of relation to government, thinking of gov’t as beyond its control, of itself as wholly controlled by gov’t. Somewhere in between and in gradations is the group that has the sense that gov’t exists for it, and shapes its consciousness accordingly.”
—Lionel Trilling (1905–1975)