Variable Search Intensity with Coordination Unemployment

This paper analyzes an urn ball matching model in which workers decide how intensively they sample job openings and apply at a stochastic number of suitable vacancies. The model allows for tractable equilibrium characterization with a continuous search intensity margin. Equilibrium is not constrained efficient; entry is excessive, search intensity can be too high or too low, and an inefficient discouraged worker effect among homogenous workers emerges under adverse labor market conditions. Unlike existing coordination friction economies with fixed search intensity, the model can account for the empirical relation between the job finding rate and the vacancy unemployment ratio, provided that search costs are small and that search intensity is sufficiently procyclical