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Strategic Unemployment

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  • Julia Angerhausen
  • Christian Bayer
  • Burkhard Hehenkamp

Abstract

We propose a dynamic model that explains why individuals may be reluctant to pick up work although the wage is above their reservation wage. Accepting low paid work will put them in an adverse position in future wage bargaining, as employers could infer the individual.s low reservation wage from his working history. Employers will exploit their knowledge o¤ering low wages to this individual in the future. Therefore, employees with low reservation wage strategically opt into unemployment to signal a high reservation wage.

Suggested Citation

  • Julia Angerhausen & Christian Bayer & Burkhard Hehenkamp, 2006. "Strategic Unemployment," Discussion Papers in Economics 06_02, University of Dortmund, Department of Economics.
    • Handle: RePEc:mik:wpaper:06_02
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    References listed on IDEAS

    as
    1. Christoffel, Kai & Kuester, Keith, 2008. "Resuscitating the wage channel in models with unemployment fluctuations," Journal of Monetary Economics, Elsevier, vol. 55(5), pages 865-887, July.
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    Cited by:

    1. Schnedler, Wendelin & Vanberg, Christoph, 2014. "Playing ‘hard to get’: An economic rationale for crowding out of intrinsically motivated behavior," European Economic Review, Elsevier, vol. 68(C), pages 106-115.
    2. Peng-Ju Su, Alice, 2020. "Information advantage and minimum wage," Information Economics and Policy, Elsevier, vol. 50(C).

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    More about this item

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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