Structural adjustment and endogenous worker recall probabilities
In this paper we investigate the incentives of unemployed workers to wait for a recall when recall probabilities are endogenously determined by the waiting decisions of others. Because of a positive externality that arise when workers seek new employment, an excessive number of workers choose to wait for a recall, and structural adjustment is slow. We also find that a small reduction in the unemployment benefits, or introducing a small cash bonus for workers that get a new job, may have no effect on unemployment in some cases, while eradicating significant levels of unemployment in other cases. Our analysis suggests that the government may face a Samaritan's Dilemma if it can influence the recall probability of workers, and that multiple equilibria may exist in a game involving both workers and an unemployment-averse government. Furthermore, we explore a link to the war of attrition literature, showing that the Bulow and Klemperer (1999) "one too many"-result may not hold if there is uncertainty concerning when the game ends.
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- Paul Klemperer & Jeremy Bulow, 1997.
"The Generalized War of Attrition,"
Economics Series Working Papers
1998-W01, University of Oxford, Department of Economics.
- Bulow, Jeremy I. & Klemperer, Paul, 1997. "The Generalized War of Attrition," CEPR Discussion Papers 1564, C.E.P.R. Discussion Papers.
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- Jeremy Bulow & Paul Klemperer, 1997. "The Generalized War of Attrition," NBER Working Papers 5872, National Bureau of Economic Research, Inc.
- Jeremy I. Bulow & Paul Klemperer, 1996. "The Generalized War of Attrition," Cowles Foundation Discussion Papers 1142, Cowles Foundation for Research in Economics, Yale University.
- Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
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- Clark, Derek J & Riis, Christian, 1996. " A Multi-winner Nested Rent-Seeking Contest," Public Choice, Springer, vol. 87(1-2), pages 177-84, April.
- Pissarides, Christopher A, 1982. "Job Search and the Duration of Layoff Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 595-612, November.
- Katz, Lawrence F & Meyer, Bruce D, 1990.
"Unemployment Insurance, Recall Expectations, and Unemployment Outcomes,"
The Quarterly Journal of Economics,
MIT Press, vol. 105(4), pages 973-1002, November.
- Lawrence F. Katz & Bruce D. Meyer, 1988. "Unemployment Insurance, Recall Expectations, And Unemployment Outcomes," NBER Working Papers 2594, National Bureau of Economic Research, Inc.
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