Asymmetric Information, Bargaining, and Unemployment Fluctuations
AbstractThe author constructs a dynamic general equilibrium model where wages are determined by bilateral bargaining and the firm has superior information. The asymmetry of information introduces unemployment fluctuations and dynamic wage sluggishness. Because the information of the firm only is revealed gradually, wages fall slowly in response to a negative shock and unemployment exhibits additional persistence. It is shown that high job destruction will generally be followed by a period of higher than average job destruction, that the presence of common shocks introduces an informational externality, and that bargaining is an inefficient method of wage determination compared to implicit contracts. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 36 (1995)
Issue (Month): 4 (November)
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- Croitoru, Lucian, 2011. "Three Unemployment Rates Relevant To Monetary Policy," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 213-238, September.
- Pablo Ruiz Verdú, 2002. "Employer Behavior When Workers Can Unionize," Business Economics Working Papers wb020803, Universidad Carlos III, Departamento de Economía de la Empresa.
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