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Unemployment Through Learning from Experience

In: Issues in Contemporary Economics

Author

Listed:
  • Steve Alpern

    (London School of Economics)

  • Dennis J. Snower

    (University of London)

Abstract

This paper analyses how workers’ wage claims can serve as a learning tool. We argue that when workers have some market power and face substantial uncertainty in the labour market, it may be in their interests to formulate their wage claims with a view to the information thereby revealed, in order to make more informed wage claims in the future. This learning behaviour can have an important by-product: unemployment. Our analysis shows how the process of information acquisition through wage claims generates: (a) rates of youth unemployment and long-term unemployment that are higher; (b) dismissal probabilities for incumbent workers that are lower than would otherwise be the case.

Suggested Citation

  • Steve Alpern & Dennis J. Snower, 1991. "Unemployment Through Learning from Experience," International Economic Association Series, in: Marc Nerlove (ed.), Issues in Contemporary Economics, chapter 3, pages 42-74, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-11576-1_3
    DOI: 10.1007/978-1-349-11576-1_3
    as

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