Demand uncertainty, mismatch, and (un)employment

Mohamed Jellal (), Jacques Thisse and Yves Zenou

No 1997033, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: We consider a finite number of firms which compete imperfectly for heterogenous workers. Firms produce a homogeneous good sold on a competitive market and face demand-induced price fluc- tuations. It is then shown that unemployment may arise in equilibrium because of uncertainty on product demand and job mismatch. However, unemployment does not arise when the vari- ance of the demand shock is small enough and/or the cost of mismatch is sufficiently low. Full employment always prevails when there is free entry. Hence, unemployment may persist as long as the incumbent firms choose their skill requirements to protect their supranormal profits.

Keywords: workers and heterogeneity; job matching; demand shock; unemployment (search for similar items in EconPapers)
JEL-codes: I28 J41 L13 (search for similar items in EconPapers)
Date: 1997-04-01
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Related works:
Journal Article: Demand uncertainty, mismatch and (un)employment (2005)
Journal Article: Demand uncertainty, mismatch and (un)employment (2005)
Working Paper: Demand uncertainty, mismatch and (un)employment (2005)
Working Paper: Demand uncertainty mismatch and (un)employment (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1997033

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