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Strategic Unemployment

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  • Julia Angerhausen
  • Christian Bayer
  • Burkhard Hehenkamp

Abstract

We propose a dynamic model that explains why individuals may be reluctant to pick up work although the wage is above their reservation wage. Accepting low paid work will put them in an adverse position in future wage bargaining, as employers could infer the individual.s low reservation wage from his working history. Employers will exploit their knowledge o¤ering low wages to this individual in the future. Therefore, employees with low reservation wage strategically opt into unemployment to signal a high reservation wage.

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Bibliographic Info

Paper provided by University of Dortmund, Department of Economics in its series Discussion Papers in Economics with number 06_02.

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Length: 23 pages
Date of creation: Jul 2006
Date of revision:
Handle: RePEc:mik:wpaper:06_02

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Cited by:
  1. René Böheim & Andrea Weber, 2011. "The Effects of Marginal Employment on Subsequent Labour Market Outcomes," German Economic Review, Verein für Socialpolitik, vol. 12(2), pages 165-181, 05.
  2. Schnedler, Wendelin & Vanberg, Christoph, 2014. "Playing ‘hard to get’: An economic rationale for crowding out of intrinsically motivated behavior," European Economic Review, Elsevier, vol. 68(C), pages 106-115.
  3. Schnedler, Wendelin & Vanberg, Christoph, 2014. "Playing 'Hard to Get': An Economic Rationale for Crowding Out of Intrinsically Motivated Behavior," Working Papers 0559, University of Heidelberg, Department of Economics.

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