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the formulation with ex post idiosyncratic uncertainty. Other recent directed search
papers in the same vein are Albrecht et al. [ 2 ] and Galenianos and Kircher [ 19 ],
looking at directed search in job applications.
The benchmark model in this literature is Smith [ 35 ], which focuses on
assortative matching and block segregation in 'marriage' models (see also Burdett
[ 7 ], Burdett and Coles [ 8 ], Coles and Burdett [ 10 ], Chade and Smith [ 9 ]). The costly
application/invitation-stage of the model, follows Shimer [ 33 ] . The novelty of our
paper lies in the multi-dimensionality of agents' types.
In the case of such a model of job search, it is assumed that a job's attractiveness
(interpreted as pay, conditions, status) can be observed from an advert. The attrac-
tiveness of a job seeker (interpreted as qualifications and experience) are readily
seen from his/her application. It is assumed that in order to observe character a costly
interview is required. In terms of job search, this would seem reasonable when there
is not much information regarding the workers in and the ethos of a firm (e.g. it may
be a small or new firm) and the skills required from a worker rather generic. Simi-
larity of character may be interpreted as the ability of the employer (or department)
and employee to work together as a team. Several labour market studies have found
empirical evidence that employers and employees are happiest with labour market
choices they view as similar to themselves in some respects (e.g. labour market type,
an organisation's ethos, educational level), see Peterson[ 30 ], Beller [ 6 ], Albelda [ 1 ].
In the literature to date, job search models typically adopt a matching function
approach, where the employer and employee search for the perfect 'fit' using a set of
costly criteria, see Coles and Burdett [ 10 ]. Equilibrium conditions are derived and
tested for robustness once the model is built, and policy recommendations follow
Burdett [ 7 ], Pissarides [ 31 ], Drewlanka [ 14 ], Shimer and Smith [ 34 ]. Jovanovic [ 24 ],
Hey [ 21 ], and MacMinn [ 25 ] are the classic studies. Devine and Piore [ 12 ]and
Shimer and Smith [ 34 ] survey the more recent developments.
Another strand in the literature is the search-theoretic literature developed by
McCall [ 27 ] and extended by Diamond and Maskin [ 13 ] and others, where the
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