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Monitoring Intensity and Technology Choice in a Model of Unemployment

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  • Haiwen Zhou

    (Old Dominion University)

Abstract

The interaction among a firm’s choices of output, technology, and monitoring intensity is studied in a general equilibrium model. Firms engage in oligopolistic competition, and unemployment is a result of the existence of efficiency wages. The following results are derived analytically. First, an increase in the cost of exerting effort leads a firm to choose a more advanced technology and a lower level of monitoring intensity. Second, an increase in the discount rate does not change a firm’s choices of technology and monitoring intensity. Third, an increase in the elasticity of substitution among goods leads a firm to choose higher levels of monitoring intensity and technology. In a model in which the level of monitoring is exogenously given, there is a negative relationship between the wage rate and the monitoring intensity. In this model with endogenously chosen monitoring intensity, the wage rate and the monitoring intensity can move either in the same direction or in opposite directions.

Suggested Citation

  • Haiwen Zhou, 2020. "Monitoring Intensity and Technology Choice in a Model of Unemployment," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 46(3), pages 504-520, June.
    • Handle: RePEc:pal:easeco:v:46:y:2020:i:3:d:10.1057_s41302-019-00144-5
    DOI: 10.1057/s41302-019-00144-5
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    Cited by:

    1. Haiwen Zhou & Ruhai Zhou, 2023. "Shirking and capital accumulation under oligopolistic competition," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 51(2), pages 394-407, September.

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    More about this item

    Keywords

    Unemployment; Efficiency wages; Monitoring intensity; The choice of technology; Oligopoly;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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