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Cyclical Variations in Wage Differentials and Unemployment


  • Ohashi, Isao


This paper attempts to reformulate in a general-equilibrium framework M. W. Reder's model, which explains cyclical variations in wage differentials and their general tendencies to narrow. Specifically, the author focuses on the three aspects of his model: the microeconomic behavior of a firm under imperfect information about labor quality; the mechanism of the economy creating unemployment; and the interaction between wage differentials and unemployment. Its implications for the macroeconomic issues on the characteristics of current unemployment and the question of why aggregate employment fluctuates are also explored. Copyright 1987 by University of Chicago Press.

Suggested Citation

  • Ohashi, Isao, 1987. "Cyclical Variations in Wage Differentials and Unemployment," Journal of Labor Economics, University of Chicago Press, vol. 5(2), pages 278-300, April.
  • Handle: RePEc:ucp:jlabec:v:5:y:1987:i:2:p:278-300

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    References listed on IDEAS

    1. Grossman, Sanford J & Hart, Oliver D, 1981. "Implicit Contracts, Moral Hazard, and Unemployment," American Economic Review, American Economic Association, vol. 71(2), pages 301-307, May.
    2. Gary S. Becker & George J. Stigler, 1974. "Law Enforcement, Malfeasance, and Compensation of Enforcers," The Journal of Legal Studies, University of Chicago Press, vol. 3(1), pages 1-18, January.
    3. Kahn, Charles M. & Green, Jerry, 1983. "Wage-Employment Contracts," Scholarly Articles 3203642, Harvard University Department of Economics.
    4. Michael Waldman, 1984. "Job Assignments, Signalling, and Efficiency," RAND Journal of Economics, The RAND Corporation, vol. 15(2), pages 255-267, Summer.
    5. Weiss, Yoram, 1984. "Wage Contracts When Output Grows Stochastically: The Roles of Mobility Costs and Capital Market Imperfections," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 155-173, April.
    6. James L. Medoff & Katharine G. Abraham, 1980. "Experience, Performance, and Earnings," The Quarterly Journal of Economics, Oxford University Press, vol. 95(4), pages 703-736.
    7. Milton Harris & Bengt Holmstrom, 1982. "A Theory of Wage Dynamics," Review of Economic Studies, Oxford University Press, vol. 49(3), pages 315-333.
    8. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-1284, December.
    9. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June.
    10. John Haltiwanger, 1982. "On the Relationship Between Risk Aversion and the Development of Long Term Worker-Firm Attachments," UCLA Economics Working Papers 274, UCLA Department of Economics.
    11. Dwight M. Jaffee & Thomas Russell, 1976. "Imperfect Information, Uncertainty, and Credit Rationing," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 651-666.
    12. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    13. Milton Harris & Bengt Holmstrom, 1981. "A Theory of Wage Dynamics," Discussion Papers 488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    14. Joanne Salop & Steven Salop, 1976. "Self-Selection and Turnover in the Labor Market," The Quarterly Journal of Economics, Oxford University Press, vol. 90(4), pages 619-627.
    15. Grossman, Herschel I, 1977. " Risk Shifting and Reliability in Labor Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(2), pages 187-209.
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