LEARNING, MATCHING AND GROWTH

We examine an endogenous growth model in which market frictions are an integral part of the economic environment. Workers invest in educatio n when young, which raises their productivity once employed. The level of schooling also acts as a key determinant of the rate of economic g rowth by influencing workers' ability to accumulate additional human c apital on-the-job. Once schooling is completed, workers search for emp loyment. The division of the surplus between vacancies and searching w orkers is characterized, as is the optimal level of education. The eco nomy may display multiple steady-state growth paths.