Intermediary Organizations in Labor Markets

Abstract

We propose a job matching model of intermediary labor markets by developing the seminal work of Kelso and Crawford. Using this model, we show that for an arbitrary fixed broker-fee rate, the salary-adjustment process converges to a core allocation in intermediary labor markets where high-skilled workers are matched to high-technology firms by the private middleman and low-skilled workers are matched to low-technology firms by the public middleman. This result means that the dual labor market is emerged as a stable outcome of job-matching promoted by the private and public middlemen. Finally, we discuss empirical relevance of our theoretical model by using the data of job placement services in Japan.