Demand uncertainty, mismatch and (un)employment
We consider a finite number of firms which compete imperfectly for heterogenous workers. Firms produce a homogeneous good sold on a competitive market and face demand-induced price fluc- tuations. It is then shown that unemployment may arise in equilibrium because of uncertainty on product demand and job mismatch. However, unemployment does not arise when the vari- ance of the demand shock is small enough and/or the cost of mismatch is sufficiently low. Full employment always prevails when there is free entry. Hence, unemployment may persist as long as the incumbent firms choose their skill requirements to protect their supranormal profits.
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- Hamilton, Jonathan & Thisse, Jacques-Francois & Zenou, Yves, 2000.
"Wage Competition with Heterogeneous Workers and Firms,"
Journal of Labor Economics,
University of Chicago Press, vol. 18(3), pages 453-472, July.
- HAMILTON, Jonathan & THISSE, Jacques-François & ZENOU, Yves, "undated". "Wage competition with heterogeneous workers and firms," CORE Discussion Papers RP 1463, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Hamilton, Jonathan & Thisse, Jacques-François & Zenou, Yves, 1999. "Wage Competition with Heterogeneous Workers and Firms," CEPR Discussion Papers 2141, C.E.P.R. Discussion Papers.
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"The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence,"
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