March 28, 2018

Download e-book for kindle: Advances in the Theory and Measurement of Unemployment by Yoram Weiss, Gideon Fishelson

By Yoram Weiss, Gideon Fishelson

ISBN-10: 0312027974

ISBN-13: 9780312027971

ISBN-10: 1349106887

ISBN-13: 9781349106882

ISBN-10: 1349106909

ISBN-13: 9781349106905

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Additional resources for Advances in the Theory and Measurement of Unemployment

Example text

Therefore, to describe equilibrium or the market values for the workers and the firms, it is necessary to describe what happens in every possible game. It is useful to write the strategies in the following manner. Let g: N ---+ {a,na} be a list of strategies that the firm has in all possible games (with all possible types it may face), and let G be the space of all such functions. For example, get) = a means that the firm agrees to negotiate with a worker of type t upon his success. Here we are using the assumption that firms are identical, so that they behave the same in any situation.

The decline in the hazard rate is, therefore, a purely statistical property. This stands in contrast with most search models, in which the hazard rate is determined by the reservation wage chosen by the worker. Jensen and Vishwanath (1985) describe a partial equilibrium model with declining hazard rate based upon this approach. Any analysis of this kind, as well as in any generalization of our model to include the above relationship, is complicated by the fact that the worker may take into account the effects of being unemployed.

Then S 4= iff p(1-6vf -ovo(k)) - E ~ O. But, for sufficiently small ps this inequality may not hold. As is shown later, in our case this situation cannot happen. If vo(k) and Vf have unique solutions, then 0 S vo(k) + Vf S 1 because the 'cake' cannot exceed 1 and cannot fall below 0 (this is true for any k). Therefore, the Nash solution can be applied to every bargaining situation with every type of workers, and it yields a wage that solves the following problem (see Roth (1979) p. 1) where p(l-w) + (l-p)ovf represents the firm's utility from the contract, pw + (l-p)ovo(k+ 1) represents the worker's utility, and Yi' Y2 are, respectively, the weights that are assigned to the firms and to the workers, Yi > 0, Y2 > O.

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Advances in the Theory and Measurement of Unemployment by Yoram Weiss, Gideon Fishelson


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