 JOB SEARCH COSTS AND INCENTIVESAndriy Zapechelnyuk and Ro'i Zultan No 1307, Working Papers from Ben-Gurion University of the Negev, Department of Economics Abstract: The costs of searching for a job vacancy are typically associated with fric- tion that deters or delays employment of potentially productive individuals. We demonstrate that in a labor market with moral hazard where effort is non- contractible, job search costs play a positive role, whose effect may outweigh the negative implications. As workers are provided incentives to exert effort by the threat of losing their job and having to search for a new vacancy, a reduction in job search costs leads to fewer employees willing to exert effort. The overall lower productivity will make more individuals and firms opting to stay out of the labor market, resulting in lower employment and decreased welfare. Eventually, a reduction of jobs search costs below a certain level results in collapse of the labor market. Keywords: job search; moral hazard; labor market; unemployment insurance (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bgu:wpaper:1307 Access Statistics for this paper More papers in Working Papers from Ben-Gurion University of the Negev, Department of Economics Contact information at EDIRC. |
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