Fairness, Search Frictions, and Offshoring
AbstractFairness considerations within the firm are introduced into the determination of wages in a two factor Pissarides-style model of search unemployment to study its implications for the unemployment rates of unskilled and skilled workers in both the closed economy case and when the economy can offshore some inputs. While the effect of a fair-wage constraint on unskilled workers takes the form of an increase in their wage and unemployment, we also OÌˆnd interesting effects on skilled workers in a closed economy. The skilled wage and skilled unemployment move in directions opposite to each other, with the actual direction of their movement depending on the elasticity of substitution between skilled and unskilled labor. The impact of offshoring of the services of unskilled labor on the unemployment of unskilled workers is stronger in the presence of fairness considerations than in the case when search frictions are the only source of unemployment. Finally, offshoring insulates the skilled labor market outcomes from fairness concerns that are present in a closed economy.
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Bibliographic InfoPaper provided by University of California-Irvine, Department of Economics in its series Working Papers with number 121303.
Length: 39 pages
Date of creation: Mar 2012
Date of revision:
Fair wages; Unemployment; Overhiring effect; offshoring;
Other versions of this item:
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-23 (All new papers)
- NEP-DGE-2012-07-23 (Dynamic General Equilibrium)
- NEP-LAB-2012-07-23 (Labour Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Fairness, Search Frictions, and Offshoring
by Christian Zimmermann in NEP-DGE blog on 2012-07-24 15:07:33
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