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Catching Hipo's: Screening, Wages and Unemployment

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  • Maarten C.W. Janssen

    (Erasmus University Rotterdam)

Abstract

In this paper, I study the wage a firm sets to attract high abilityworkers (hipo's) in situationsof unemployment. I show that the higher unemployment, the larger afirm's incentives to sorthigh and low ability workers. Moreover, workers will signal their(high) ability in situationsof (high) unemployment only if a job offers a high enough wage. Themain result, therefore,says that a firm sets higher wages, the higher unemployment. As themodel is applicable tothe upper segment of the labour market, the result is in line withthe empirical fact thatincome inequality increases when more people are unemployed.

Suggested Citation

  • Maarten C.W. Janssen, 2000. "Catching Hipo's: Screening, Wages and Unemployment," Tinbergen Institute Discussion Papers 00-028/1, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20000028
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Monopsony Power; Labor Market; Screening;
    All these keywords.

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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