Long-run Consequences of Ranking Job Applicants by Unemployment Duration: Theoretical and Numerical Analyses

Akiomi Kitagawa ()

No 301, TERG Discussion Papers from Graduate School of Economics and Management, Tohoku University

Abstract: This paper considers the long-run consequences of ranking job applicants on the basis of their unemployment durations by using a general equilibrium model in which statistical discrimination by firms against jobless workers may yield multiple stationary equilibria. Because the most inefficient equilibrium is supported by the belief that jobless workers have lost their employability, the government should dissuade firms from holding this extreme belief, thereby creating second chances for jobless workers. Moreover, by reducing the incomes of jobless workers through taxation, the government can create a new equilibrium in which job seekers can find new jobs without experiencing long-term unemployment.

Pages: 60 pages
Date: 2013-09
New Economics Papers: this item is included in nep-lab
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http://hdl.handle.net/10097/56457

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Working Paper: Long-run Consequences of Ranking Job Applicants by Unemployment Duration: Theoretical and Numerical Analyses (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:toh:tergaa:301

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