Unemployment volatility: When workers pay costs upon accepting jobs

Rich Ryan

International Journal of Economic Theory, 2024, vol. 20, issue 3, 303-333

Abstract: Hiring workers is costly. Firms' costs reduce resources that can go to recruitment and amplify how unemployment responds to changes in productivity. Workers also incur up‐front costs. Examples include moving expenses and regulatory fees. Workers' costs lessen unemployment volatility and leave resources available for recruitment unchanged. Their influence is bounded by the properties of a matching function. Using adjusted data on job finding, I estimate a bound that ascribes limited influence. The results demonstrate that workers' costs affect outcomes (firms threaten workers with paying the fixed costs again if negotiations fail), but their influence on volatility is less than firms' costs.

Date: 2024
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