Structural adjustment and endogenous worker recall probabilities
AbstractIn this paper we investigate the incentives of unemployed workers to wait for a recall when recall probabilities are endogenously determined by the waiting decisions of others. Because of a positive externality that arise when workers seek new employment, an excessive number of workers choose to wait for a recall, and structural adjustment is slow. We also find that a small reduction in the unemployment benefits, or introducing a small cash bonus for workers that get a new job, may have no effect on unemployment in some cases, while eradicating significant levels of unemployment in other cases. Our analysis suggests that the government may face a Samaritan's Dilemma if it can influence the recall probability of workers, and that multiple equilibria may exist in a game involving both workers and an unemployment-averse government. Furthermore, we explore a link to the war of attrition literature, showing that the Bulow and Klemperer (1999) "one too many"-result may not hold if there is uncertainty concerning when the game ends.
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Bibliographic InfoPaper provided by Department of Economics, University of Bergen in its series Working paper Series with number 0206.
Date of creation: 14 Mar 2002
Date of revision:
structural adjustment; unemployment; recalls; search; war of attrition;
Other versions of this item:
- Meland, Frode & Torsvik, Gaute, 2002. "Structural adjustment and endogenous worker recall probabilities," Working Papers in Economics 06/02, University of Bergen, Department of Economics.
- Frode Meland & Gaute Torsvik, 2002. "Structural Adjustment and Endogenous Worker Recall Probabilities," CESifo Working Paper Series 708, CESifo Group Munich.
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
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