How Does Imperfect Competition in the Labor Market Affect Unemployment Policies?
AbstractWe consider a continuum of workers ranked according to their abilities to acquire education and two firms with different technologies that imperfectly compete in wages to attract these workers. The education cost to be borne by workers is higher in the high-technology firm. In equilibrium, we show that the unemployed workers are those with the lowest initial abilities. We then study different policies that subsidize either education cost or wages. We found that the first-best allocation can only be implemented by selective policies. We analyze second-best nonselective policies and show that, in terms of welfare, subsidizing education costs or wages is strictly equivalent. Copyright 2002 by Blackwell Publishing Inc.
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Bibliographic InfoArticle provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.
Volume (Year): 4 (2002)
Issue (Month): 3 ()
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Other versions of this item:
- Wauthy, Xavier & Zenou, Yves, 2001. "How Does Imperfect Competition in the Labor Market Affect Unemployment Policies?," IZA Discussion Papers 340, Institute for the Study of Labor (IZA).
- Wauthy, Xavier & Zenou, Yves, 2001. "How Does Imperfect Competition in the Labour Market Affect Unemployment Policies?," CEPR Discussion Papers 2902, C.E.P.R. Discussion Papers.
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
- J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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