Does Bargaining Matter in the Small Firm’s Matching Model?

In this article, we use a stylized model of the labor market to investigate the effects of three alternative and well-known bargaining solutions. We apply the Nash, the Egalitarian and the Kalai-Smorodinsky bargaining solutions in the small firm’s matching model of unemployment. We first show that the Egalitarian and the Kalai-Smorodinsky solutions are easily implementable within search-matching economies. Second, we show that the differences between the three solution are weaker than expected. This contrasts with some of the main results obtained by the recent literature.