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Incentives in Competitive Search Equilibrium

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  • Espen R. Moen
  • A Rosen

Abstract

This 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 Info

Paper provided by Centre for Economic Performance, LSE in its series CEP Discussion Papers with number dp0832.

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Date of creation: Nov 2007
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Handle: RePEc:cep:cepdps:dp0832

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Web page: http://cep.lse.ac.uk/_new/publications/series.asp?prog=CEP

Related research

Keywords: Private information; incentives; search; unemployment; wage rigidity;

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  1. Mirabelle Muûls & Mauro Pisu, 2007. "Imports and Exports at the Level of the Firm : Evidence from Belgium," Working Paper Research 114, National Bank of Belgium.
  2. Yashiv, Eran, 2006. "U.S. Labor Market Dynamics Revisited," IZA Discussion Papers 2455, Institute for the Study of Labor (IZA).
  3. Henry Overman & Patricia Rice & Anthony Venables, 2010. "Economic Linkages across Space," Regional Studies, Taylor & Francis Journals, vol. 44(1), pages 17-33.
  4. Christos Genakos & Tommaso Valletti, 2008. "Testing the “Waterbed” Effect in Mobile Telephony," CEIS Research Paper 110, Tor Vergata University, CEIS, revised 11 Jul 2008.
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Cited by:
  1. Niko Matouschek & P Ramezzana & Frédéric Robert-Nicoud, 2008. "Labor Market Reforms, Job Instability, and the Flexibility of the Employment Relationship," CEP Discussion Papers dp0865, Centre for Economic Performance, LSE.
  2. Guido Menzio & Espen Moen, 2008. "Worker Replacement," PIER Working Paper Archive 08-040, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania.
  3. Faccini, Renato & Rosazza Bondibene, Chiara, 2012. "Labour market institutions and unemployment volatility: evidence from OECD countries," Bank of England working papers 461, Bank of England.
  4. di Pace, Federico & Faccini, Renato, 2010. "Deep habits and the cyclical behaviour of equilibrium unemployment and vacancies," Bank of England working papers 391, Bank of England.
  5. Manolis Galenianos & Philipp Kircher, 2012. "On The Game‐Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, 02.
  6. Philipp Kircher & Jan Eeckhout, 2008. "Prices as Optimal Competitive Sales Mechanisms," 2008 Meeting Papers 504, Society for Economic Dynamics.
  7. Pedro Gomes & Javier Fernandez-Blanco, 2013. "On the Composition Effects on the Labor Market Outcomes," 2013 Meeting Papers 561, Society for Economic Dynamics.

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