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Labour search with endogenous outside option

Author

Listed:
  • Ritesh Jain

    (Institute of Economics, Academia Sinica)

  • Srinivasan Murali

    (Indian Institute of Management Bangalore)

Abstract

We incorporate the extended version of Nash bargaining proposed by Vartiainen (2007) in a standard labour search and matching model to endogenously determine the outside option of workers along with their wages. We find that the optimal outside option of a worker under this framework is zero and this equilibrium maximizes social welfare when the economy is constrained efficient. (2007) in a standard labour search and matching model to endogenously determine the outside option of workers along with their wages. We find that the optimal outside option of a worker under this framework is zero and this equilibrium maximizes social welfare when the economy is constrained efficient.

Suggested Citation

  • Ritesh Jain & Srinivasan Murali, 2022. "Labour search with endogenous outside option," Economics Bulletin, AccessEcon, vol. 42(2), pages 1092-1102.
    • Handle: RePEc:ebl:ecbull:eb-21-01094
    as

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    References listed on IDEAS

    as
    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    2. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, vol. 107(5), pages 893-928, October.
    3. Vartiainen, Hannu, 2007. "Collective choice with endogenous reference outcome," Games and Economic Behavior, Elsevier, vol. 58(1), pages 172-180, January.
    4. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Search and Matching; Bargaining theory; Endogenous disagreement;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor

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