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Ranking and Long-Term Unemployment in a Model with Efficiency Wages

In: The Changing Japanese Labor Market

Author

Listed:
  • Akiomi Kitagawa

    (Tohoku University)

  • Souichi Ohta

    (Keio University)

  • Hiroshi Teruyama

    (Kyoto University)

Abstract

This chapter considers the long-run consequences of ranking job applicants on the basis of their unemployment durationsUnemployment duration (spell) by using a general equilibrium model, in which the wages paid by firms not only motivate their employees but also induce jobless workers to preserve their employability. Ranking and long-term unemployment become actual when the cost of establishing a new firm is so large that firms cannot pay high wages to their employees. By subsidizing newly established firms, the government can guide the economy to a more efficient equilibrium, in which every job seeker can find a new job by experiencing one period of unemployment, and thus firms’ distaste for the long-term unemployed is effectively nullified.

Suggested Citation

  • Akiomi Kitagawa & Souichi Ohta & Hiroshi Teruyama, 2018. "Ranking and Long-Term Unemployment in a Model with Efficiency Wages," Advances in Japanese Business and Economics, in: The Changing Japanese Labor Market, chapter 0, pages 65-115, Springer.
    • Handle: RePEc:spr:advchp:978-981-10-7158-4_3
    DOI: 10.1007/978-981-10-7158-4_3
    as

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