Equilibrium unemployment as a discipline device when finding employment is costly
In this paper, we study a model that incorporates costly job search into an efficiency wage model. We show that the relationship between wages and detection rates is ambiguous in this framework. The model can generate a positive relationship, consistent with empirically reasonable values for unemployment rates, job finding rates, and employment duration.
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Volume (Year): 44 (2011)
Issue (Month): 2 (May)
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