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Long-run Consequences of Ranking Job Applicants by Unemployment Duration: Theoretical and Numerical Analyses

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  • Akiomi KITAGAWA

Abstract

This paper considers the long-run consequences of ranking job applicants on the basis of their unemployment durations by using a general equilibrium model in which statistical discrimination by firms against jobless workers may yield multiple stationary equilibria. Because the most inefficient equilibrium is supported by the belief that jobless workers have lost their employability, the government should dissuade firms from holding this extreme belief, thereby creating second chances for jobless workers. Moreover, by reducing the incomes of jobless workers through taxation, the government can create a new equilibrium in which job seekers can find new jobs without experiencing long-term unemployment.

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File URL: http://hdl.handle.net/10097/56457
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File URL: http://ir.library.tohoku.ac.jp/re/bitstream/10097/56457/1/terg301.pdf
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Bibliographic Info

Paper provided by Graduate School of Economics and Management, Tohoku University in its series TERG Discussion Papers with number 301.

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Length: 60 pages
Date of creation: Sep 2013
Date of revision:
Handle: RePEc:toh:tergaa:301

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  1. Oberholzer-Gee, Felix, 2008. "Nonemployment stigma as rational herding: A field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 65(1), pages 30-40, January.
  2. Stefan Eriksson, 2006. "Skill Loss, Ranking of Job Applicants and the Dynamics of Unemployment," German Economic Review, Verein für Socialpolitik, vol. 7, pages 265-296, 08.
  3. Stefan Eriksson & Jonas Lagerström, 2006. "Competition between Employed and Unemployed Job Applicants: Swedish Evidence," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(3), pages 373-396, October.
  4. Eriksson, Stefan & Rooth, Dan-Olof, 2011. "Do Employers Use Unemployment as a Sorting Criterion When Hiring? Evidence from a Field Experiment," IZA Discussion Papers 6235, Institute for the Study of Labor (IZA).
  5. Olivier Jean Blanchard & Peter Diamond, 1990. "Ranking, Unemployment Duration, and Wages," NBER Working Papers 3387, National Bureau of Economic Research, Inc.
  6. Lockwood, Ben, 1991. "Information Externalities in the Labour Market and the Duration of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 58(4), pages 733-53, July.
  7. Phelps, Edmund S, 1972. "The Statistical Theory of Racism and Sexism," American Economic Review, American Economic Association, vol. 62(4), pages 659-61, September.
  8. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  9. Acemoglu, Daron, 1995. "Public Policy in a Model of Long-Term Unemployment," Economica, London School of Economics and Political Science, vol. 62(246), pages 161-78, May.
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