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The Persistence and Indeterminancy of Unemployment in Search Equilibrium

  • Mortensen, Dale T

Existing theories that explain persistent and indeterminant unemployment are brought together within the unifying framework of search equilibrium. External economies that exhibit increasing return to production and exchange are identified as potential causes for both the indeterminacy and the persistence of unemployment for a wide range of assumptions about wage determination. Those considered include a "market-clearing" wage, an "efficiency" wage, and an "insider-outsider" wage model. Although either of the non-market-clearing specifications can induce greater persistence, multiple equilibria require increasing returns in the technologies of either production or exchange. Copyright 1989 by The editors of the Scandinavian Journal of Economics.

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Article provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.

Volume (Year): 91 (1989)
Issue (Month): 2 ()
Pages: 347-70

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Handle: RePEc:bla:scandj:v:91:y:1989:i:2:p:347-70
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  1. Olivier J. Blanchard & Lawrence H. Summers, 1986. "Hysteresis and the European Unemployment Problem," NBER Chapters, in: NBER Macroeconomics Annual 1986, Volume 1, pages 15-90 National Bureau of Economic Research, Inc.
  2. Lindbeck, Assar & Snower, Dennis J., 1986. "Efficiency Wages Versus Insiders and Outsiders," CEPR Discussion Papers 133, C.E.P.R. Discussion Papers.
  3. 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.
  4. Lindbeck, Assar & Snower, Dennis J, 1986. "Wage Setting, Unemployment, and Insider-Outsider Relations," American Economic Review, American Economic Association, vol. 76(2), pages 235-39, May.
  5. Diamond, Peter A, 1981. "Mobility Costs, Frictional Unemployment, and Efficiency," Journal of Political Economy, University of Chicago Press, vol. 89(4), pages 798-812, August.
  6. Howitt, Peter, 1988. "Business Cycles with Costly Search and Recruiting," The Quarterly Journal of Economics, MIT Press, vol. 103(1), pages 147-65, February.
  7. Howitt, Peter & McAfee, R Preston, 1987. "Costly Search and Recruiting," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 28(1), pages 89-107, February.
  8. Blanchard, Olivier Jean & Summers, Lawrence H, 1988. "Beyond the Natural Rate Hypothesis," American Economic Review, American Economic Association, vol. 78(2), pages 182-87, May.
  9. Pissarides, Christopher A, 1987. "Search, Wage Bargains and Cycles," Review of Economic Studies, Wiley Blackwell, vol. 54(3), pages 473-83, July.
  10. Pissarides, Christopher A, 1984. "Search Intensity, Job Advertising, and Efficiency," Journal of Labor Economics, University of Chicago Press, vol. 2(1), pages 128-43, January.
  11. Weitzman, Martin L, 1982. "Increasing Returns and the Foundations of Unemployment Theory," Economic Journal, Royal Economic Society, vol. 92(368), pages 787-804, December.
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