Ranking and Long-Term Unemployment in a Model with Efficiency Wages

Akiomi Kitagawa (), Souichi Ohta () and Hiroshi Teruyama
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Souichi Ohta: Keio University
Hiroshi Teruyama: Kyoto University

Chapter Chapter 3 in The Changing Japanese Labor Market, 2018, pp 65-115 from Springer

Abstract: Abstract This chapter considers the long-run consequences of ranking job applicants on the basis of their unemployment durationsUnemployment duration (spell) by using a general equilibrium model, in which the wages paid by firms not only motivate their employees but also induce jobless workers to preserve their employability. Ranking and long-term unemployment become actual when the cost of establishing a new firm is so large that firms cannot pay high wages to their employees. By subsidizing newly established firms, the government can guide the economy to a more efficient equilibrium, in which every job seeker can find a new job by experiencing one period of unemployment, and thus firms’ distaste for the long-term unemployed is effectively nullified.

Keywords: Duration dependence; Employability; Efficiency wage Long-term unemployment; Ranking; Statistical discrimination (search for similar items in EconPapers)
Date: 2018
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DOI: 10.1007/978-981-10-7158-4_3

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