IDEAS home Printed from https://ideas.repec.org/p/qed/wpaper/740.html
   My bibliography  Save this paper

Informational Externalities in the Labour Market and Their Implications for the Duration of Unemployment

Author

Listed:
  • Ben Lockwood

Abstract

This paper considers a matching model of the labour market where firms can get partial information about workers by testing them prior to hiring them. It is shown that firm's hiring decisions generate several external effects. The first is that by testing the average productivity of workers in the unemployment pool is lowered, which may lead to non-existence of equilibrium. The second is an informational externality; with testing, workers of different ability exit unemployment at different rates, and so unemployment duration is a signal of productivity. It is shown that in equilibrium, firm may wish to condition on duration, only hiring those workers whose duration is below a critical value. Equilibrium is generally inefficient, with too much testing, and too low a critical value for duration.

Suggested Citation

  • Ben Lockwood, 1989. "Informational Externalities in the Labour Market and Their Implications for the Duration of Unemployment," Working Paper 740, Economics Department, Queen's University.
    • Handle: RePEc:qed:wpaper:740
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:qed:wpaper:740. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Mark Babcock (email available below). General contact details of provider: https://edirc.repec.org/data/qedquca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.