Dynamics of the planning solution in the discrete-time textbook model of labor market search and matching.

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2003-11-24
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Bunzel, Helle
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

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The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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This paper takes a discrete-time adaptation of the continuous−time matching economy described in Pissarides (1990, 2000), and computes the solution to the dynamic planning problem. The solution is shown to be completely characterized by a first−order, non−linear map. We show that the map admits a unique stationary solution which is dynamically unstable. Oscillatory solutions are possible but there is no possibility of periodic solutions. The planner picks the initial condition that places the economy directly on the steady state. Our results are in sharp contrast to received wisdom on out−of−steady−state dynamics in the continuous−time decentralized version of the Pissarides model where adjustment to the steady state is non−instantaneous, and overshooting of vacancies is possible.

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