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Jobs with different wage determination mechanisms, social efficiency and unemployment

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  • Masui, Makoto
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    Abstract

    The purpose of this paper is to construct a theoretical framework for the labor market, which is composed of a variety of jobs with different wage determination mechanisms. We identify an equilibrium in which some firms post a wage and others bargain with workers. This paper shows that the proportion of firms adopting wage bargaining in a decentralized equilibrium is below the socially optimal level. We identify policies to increase this proportion and to improve social efficiency. Furthermore, we examine the impact of those policies on unemployment. The results of this study will determine the direction of employment policy on the labor market with various employment styles.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of the Japanese and International Economies.

    Volume (Year): 25 (2011)
    Issue (Month): 1 (March)
    Pages: 56-75

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    Handle: RePEc:eee:jjieco:v:25:y:2011:i:1:p:56-75

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    Web page: http://www.elsevier.com/locate/inca/622903

    Related research

    Keywords: Random-matching Wage bargaining Wage posting On-the-job search;

    References

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    1. Ellingsen, Tore & Rosén, Åsa, 1997. "Fixed or Flexible? Wage Setting in Search Equilibrium," Working Paper Series in Economics and Finance, Stockholm School of Economics 185, Stockholm School of Economics.
    2. Christopher A. Pissarides, 1992. "Search Unemployment with on-the-job Search," CEP Discussion Papers, Centre for Economic Performance, LSE dp0074, Centre for Economic Performance, LSE.
    3. Wang, Ruqu, 1995. "Bargaining versus posted-price selling," European Economic Review, Elsevier, Elsevier, vol. 39(9), pages 1747-1764, December.
    4. Claudio Michelacci & Javier Suarez, 2006. "Incomplete Wage Posting," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 114(6), pages 1098-1123, December.
    5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, The MIT Press, edition 1, volume 1, number 0262161877, December.
    6. Eran Yashiv, 2007. "Labor Search and Matching in Macroeconomics," CEP Discussion Papers, Centre for Economic Performance, LSE dp0803, Centre for Economic Performance, LSE.
    7. Yashiv, Eran, 2007. "Labor search and matching in macroeconomics," European Economic Review, Elsevier, Elsevier, vol. 51(8), pages 1859-1895, November.
    8. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers, Centre for Economic Performance, LSE dp0110, Centre for Economic Performance, LSE.
    9. Daron Acemoglu & Robert Shimer, 1999. "Efficient Unemployment Insurance," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 107(5), pages 893-928, October.
    10. Moen, Espen R, 1997. "Competitive Search Equilibrium," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 105(2), pages 385-411, April.
    11. Camera, G. & Delacroix, A., 2001. "Bargaining or Price Posting?," Purdue University Economics Working Papers, Purdue University, Department of Economics 1147, Purdue University, Department of Economics.
    12. Gabriele Camera & Alain Delacroix, 2004. "Trade Mechanism Selection in Markets with Frictions," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(4), pages 851-868, October.
    13. Acemoglu, Daron, 2001. "Good Jobs versus Bad Jobs," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 19(1), pages 1-21, January.
    14. Yashiv, Eran, 2007. "Labor Search and Matching in Macroeconomics," IZA Discussion Papers 2743, Institute for the Study of Labor (IZA).
    15. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 57(2), pages 279-98, April.
    16. Arnold, Michael A & Lippman, Steven A, 1998. "Posted Prices versus Bargaining in Markets with Asymmetric Information," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 36(3), pages 450-57, July.
    17. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 96(6), pages 1267-93, December.
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