Productivity Investment and Labor Force Participation in Search Equilibrium

The present paper contributes to the theoretical analysis of the human capital investment and participation decision of heterogeneous workers in the search and matching framework. Its aim is to characterize the equilibrium and to identify the efficiency. Here, the paper studies search equilibrium and matching to consider the participation decision of heterogeneous workers who have different inherent ability levels. The productivity investment decision is endogenous and wages are determined by the Nash bargain among participants.