Labour search with endogenous outside option

Ritesh Jain () and Srinivasan Murali ()
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Ritesh Jain: Institute of Economics, Academia Sinica
Srinivasan Murali: Indian Institute of Management Bangalore

Economics Bulletin, 2022, vol. 42, issue 2, 1092 - 1102

Abstract: We incorporate the extended version of Nash bargaining proposed by Vartiainen (2007) in a standard labour search and matching model to endogenously determine the outside option of workers along with their wages. We find that the optimal outside option of a worker under this framework is zero and this equilibrium maximizes social welfare when the economy is constrained efficient. (2007) in a standard labour search and matching model to endogenously determine the outside option of workers along with their wages. We find that the optimal outside option of a worker under this framework is zero and this equilibrium maximizes social welfare when the economy is constrained efficient.

Keywords: Search and Matching; Bargaining theory; Endogenous disagreement (search for similar items in EconPapers)
JEL-codes: C7 J2 (search for similar items in EconPapers)
Date: 2022-06-30
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