We develop a life-cycle model of the labor market in which di¤erent worker-…rm matches have di¤erent quality and the assignment of the right workers to the right …rms is time consuming because of search and learning frictions. The rate at which workers move between unemployment, employment and across di¤erent …rms is endogenous because search is directed and, hence, workers can choose whether to seek low-wage jobs that are easy to …nd or high-wage jobs that are hard to …nd. We calibrate our theory using data on labor market transitions aggregated across workers of di¤erent ages. We validate our theory by showing that it predicts quite well the pattern of labor market transitions for workers of di¤erent ages. Finally, we use our theory to decompose the age pro…les of transition rates, wages and productivity into the e¤ects of age variation in work-life expectancy, human capital and match quality.JEL Classi…cation: E24; J63; J64

In a market in which sellers compete by posting mechanisms, we study how the properties of the meeting technology affect the mechanism that sellers select. In general, sellers have incentive to use mechanisms that are socially efficient. In our environment, sellers achieve this by posting an auction with a reserve price equal to their own valuation, along with a transfer that is paid by (or to) all buyers with whom the seller meets. However, we define a novel condition on meeting technologies, which we call "invariance," and show that the transfer is equal to zero if and only if the meeting technology satisfies this condition.JEL classification: C78, D44, D83.

No abstract