ECO 2121 Lecture Notes - Lecture 3: W. M. Keck Observatory
13 Oct 2016
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Document Summary
Clustering of firms in the same location can improve the matching of workers and firms, decreasing training costs and increasing productivity. Take the case of software firms hiring computer programmers with different skill sets depending on their knowledge of different programming languages and different programming tasks. Firms have different skill requirements and hire workers with the best skill matches. Labor matching model assumptions: variation in worker skills each worker has a unique skill described by a position or. Address on a circle with a one unit circumference. Assume four workers with skills evenly spaced on the circle. The address of a worker is the distance between the worker"s skill position and the north pole of the circle. 3-3: firm entry each firm enters the market by picking a good to produce with an associated skill requirement. Suppose firm a enters with skill requirement s = 3-3, panel a, the equilibrium mismatch per worker is.
