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A way of explaining unemployment through a wage-setting game

  • Tasnadi, Attila

We investigate a duopsonistic wage-setting game in which the firms have a limited number of workplaces. We assume that the firms have heterogeneous productivity, that there are two types of workers with different reservation wages and that a worker's productivity is independent of his type. We show that equilibrium unemployment arises in the wage-setting game under certain conditions, although the efficient allocation of workers would result in full employment.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 12 (2005)
Issue (Month): 2 (April)
Pages: 191-203

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Handle: RePEc:eee:labeco:v:12:y:2005:i:2:p:191-203
Contact details of provider: Web page: http://www.elsevier.com/locate/labeco

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  1. 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.
  2. 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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  4. Thisse, Jacques-Francois & Zenou, Yves, 2000. "Skill mismatch and unemployment," Economics Letters, Elsevier, vol. 69(3), pages 415-420, December.
  5. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-42, March.
  6. Gottfries, Nils & McCormick, Barry, 1995. "Discrimination and open unemployment in a segmented labour market," European Economic Review, Elsevier, vol. 39(1), pages 1-15, January.
  7. Wauthy, Xavier & Zenou, Yves, 2001. "How Does Imperfect Competition in the Labor Market Affect Unemployment Policies?," IZA Discussion Papers 340, Institute for the Study of Labor (IZA).
  8. Philip J. Reny, 1999. "On the Existence of Pure and Mixed Strategy Nash Equilibria in Discontinuous Games," Econometrica, Econometric Society, vol. 67(5), pages 1029-1056, September.
  9. James B. Rebitzer & Lowell J. Taylor, 1991. "The Consequences of Minimum Wage Laws: Some New Theoretical Ideas," NBER Working Papers 3877, National Bureau of Economic Research, Inc.
  10. Albert Ma, C.T. & Weiss, A.M., 1991. "A Signaling Theory of Unemployment," Papers 7, Boston University - Department of Economics.
  11. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  12. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  13. Sattinger, Michael, 1993. "Assignment Models of the Distribution of Earnings," Journal of Economic Literature, American Economic Association, vol. 31(2), pages 831-80, June.
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