AbstractWe 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 InfoPaper provided by University of Dortmund, Department of Economics in its series Discussion Papers in Economics with number 06_02.
Length: 23 pages
Date of creation: Jul 2006
Date of revision:
Other versions of this item:
- Julia Angerhausen & Christian Bayer & Burkhard Hehenkamp, 2010. "Strategic Unemployment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 166(3), pages 439-461, September.
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
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