Wage Bargaining, Labor Turnover, and the Business Cycle: A Model with Asymmetric Information
AbstractThis paper presents a wage bargaining model in which the employer and employee are each uncertain about the other's reservation wage. Under specified circumstances, the model's equilibrium is shown to involve unilateral wage setting and inefficient labor turnover. In addition, aggregate demand shocks affect the equilibrium in a way that produces procyclical quits and countercyclical layoffs.These results are obtained without resorting to assumptions of nominal wage rigidity, long-term contracting, or aggregate price misperceptions.
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Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Labor Economics.
Volume (Year): 3 (1985)
Issue (Month): 4 (October)
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Web page: http://www.journals.uchicago.edu/JOLE/
Other versions of this item:
- Motty Perry & Gary Solon, 1984. "Wage Bargaining, Labor Turnover, and the Business Cycle: A Model with Asymmetric Information," NBER Working Papers 1359, National Bureau of Economic Research, Inc.
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Levine's Working Paper Archive
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