Incentives in Competitive Search Equilibrium
AbstractThis paper analyses the interaction between internal agency problems within firms and external search frictions when workers have private information. We show that the allocation of resources is determined by a modified Hosios Rule. We then analyze the effect of changes in the macro economic variables on the wage contract and the unemployment rate. We find that private information may increase the responsiveness of the unemployment rate to changes in productivity. The incentive power of the wage contracts is positively related to high productivity, low unemployment benefits and high search frictions.
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Bibliographic InfoPaper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0832.
Date of creation: Nov 2007
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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP
Private information; incentives; search; unemployment; wage rigidity;
Find related papers by JEL classification:
- E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J60 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-12-15 (All new papers)
- NEP-BEC-2007-12-15 (Business Economics)
- NEP-LAB-2007-12-15 (Labour Economics)
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