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Incentives in Competitive Search Equilibrium and Wage Rigidity

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  • Moen, Espen R.
  • Rosén, Ã…sa

Abstract

This paper examines competitive search equilibrium when workers' effort choice and 'type' are private information. We derive a modified Hosios Rule determining the allocation of resources, and analyze how private information influences the responsiveness of the unemployment rate to changes in macroeconomic variables. Most importantly, private information increases the responsiveness of the unemployment rate to changes in the general (type- and effort independent) productivity level. If the changes also affect the information structure, the responsiveness of the unemployment rate may be large, even if the changes in expected productivity are small.

Suggested Citation

  • Moen, Espen R. & Rosén, Ã…sa, 2006. "Incentives in Competitive Search Equilibrium and Wage Rigidity," CEPR Discussion Papers 5554, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:5554
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    References listed on IDEAS

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    Cited by:

    1. Di Pace, F. & Faccini, R., 2012. "Deep habits and the cyclical behaviour of equilibrium unemployment and vacancies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(2), pages 183-200.
    2. Manolis Galenianos & Philipp Kircher, 2012. "On The Game‐Theoretic Foundations Of Competitive Search Equilibrium," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 1-21, February.
    3. Philipp Kircher & Jan Eeckhout, 2008. "Prices as Optimal Competitive Sales Mechanisms," 2008 Meeting Papers 504, Society for Economic Dynamics.
    4. Eeckhout, Jan & Kircher, Philipp, 2010. "Sorting versus screening: Search frictions and competing mechanisms," Journal of Economic Theory, Elsevier, vol. 145(4), pages 1354-1385, July.
    5. Haefke, Christian & Sonntag, Marcus & van Rens, Thijs, 2013. "Wage rigidity and job creation," Journal of Monetary Economics, Elsevier, vol. 60(8), pages 887-899.
    6. Renato Faccini & Chiara Rosazza Bondibene, 2012. "Labour market institutions and unemployment volatility: evidence from OECD countries," Bank of England working papers 461, Bank of England.
    7. Matouschek, Niko & Ramezzana, Paolo & Robert-Nicoud, Frédéric, 2009. "Labor market reforms, job instability, and the flexibility of the employment relationship," European Economic Review, Elsevier, vol. 53(1), pages 19-36, January.
    8. Veronica Guerrieri & Robert Shimer & Randall Wright, 2010. "Adverse Selection in Competitive Search Equilibrium," Econometrica, Econometric Society, vol. 78(6), pages 1823-1862, November.
    9. Veronica Guerrieri, 2007. "Heterogeneity, Job Creation and Unemployment Volatility," Scandinavian Journal of Economics, Wiley Blackwell, vol. 109(4), pages 667-693, December.
    10. Faccini, Renato & Ortigueira, Salvador, 2010. "Labor-market volatility in the search-and-matching model: The role of investment-specific technology shocks," Journal of Economic Dynamics and Control, Elsevier, vol. 34(8), pages 1509-1527, August.
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    Keywords

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    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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