AbstractThe empirical literature on happiness finds that employment significantly contributes to well-being. We propose a dynamic model that explains why individuals may nonetheless be reluctant to pick up low-paid work. Accepting low-paid work will put them in an adverse position in future wage bargaining, as employers could infer the individual's low reservation wage from his working history. Employers will exploit their knowledge by offering low wages to this individual in the future. Therefore, employees with low reservation wage strategically opt into unemployment to signal a high reservation wage.
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Bibliographic InfoArticle provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.
Volume (Year): 166 (2010)
Issue (Month): 3 (September)
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Web page: http://www.mohr.de/jite
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Other versions of this item:
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
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- Böheim, René & Weber, Andrea, 2006.
"The Effects of Marginal Employment on Subsequent Labour Market Outcomes,"
IZA Discussion Papers
2221, Institute for the Study of Labor (IZA).
- René Böheim & Andrea Weber, 2011. "The Effects of Marginal Employment on Subsequent Labour Market Outcomes," German Economic Review, Verein für Socialpolitik, vol. 12(2), pages 165-181, 05.
- René Böheim & Andrea Weber, 2006. "The effects of marginal employment on subsequent labour market outcomes," Economics working papers 2006-12, Department of Economics, Johannes Kepler University Linz, Austria.
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