Equilibrium unemployment as a discipline device when finding employment is costly

Equilibrium unemployment as a discipline device when finding employment is costly

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Article ID: iaor201111969
Volume: 44
Issue: 2
Start Page Number: 709
End Page Number: 717
Publication Date: May 2011
Journal: Canadian Journal of Economics/Revue canadienne d'conomique
Authors: ,
Keywords: modelling, unemployment
Abstract:

In this paper, we study a model that incorporates costly job search into an efficiency wage model. We show that the relationship between wages and detection rates is ambiguous in this framework. The model can generate a positive relationship, consistent with empirically reasonable values for unemployment rates, job finding rates, and employment duration.

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