Demand uncertainty, mismatch and (un)employment
AbstractWe consider a finite number of firms which compete imperfectly for heterogenous workers. Firms produce a homogeneous good sold on a competitive market and face demand-induced price fluc- tuations. It is then shown that unemployment may arise in equilibrium because of uncertainty on product demand and job mismatch. However, unemployment does not arise when the vari- ance of the demand shock is small enough and/or the cost of mismatch is sufficiently low. Full employment always prevails when there is free entry. Hence, unemployment may persist as long as the incumbent firms choose their skill requirements to protect their supranormal profits.
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Bibliographic InfoArticle provided by Elsevier in its journal Economics Letters.
Volume (Year): 88 (2005)
Issue (Month): 1 (July)
Contact details of provider:
Web page: http://www.elsevier.com/locate/ecolet
Other versions of this item:
- Jellal, Mohamed & Thisse, Jacques-François & Zenou, Yves, 2005. "Demand uncertainty mismatch and (un)employment," MPRA Paper 38437, University Library of Munich, Germany.
- JELLAL, Mohamed & THISSE, Jacques-François & ZENOU, Yves, 1997. "Demand uncertainty, mismatch, and (un)employment," CORE Discussion Papers 1997033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- I28 - Health, Education, and Welfare - - Education - - - Government Policy
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
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