Structural adjustment and endogenous worker recall probabilities

Frode Meland () and Gaute Torsvik
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Frode Meland: University of Bergen, Department of Economics, Postal: Hermann Fossgt. 6, N-5007 Bergen, Norway, http://www.uib.no/persons/Frode.Meland

No 06/02, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: In this paper we investigate the incentives of unemployed workers to wait for a recall when recall probabilities are endogenously determined by the waiting decisions of others. Because of a positive externality that arise when workers seek new employment, an excessive number of workers choose to wait for a recall, and structural adjustment is slow. We also find that a small reduction in the unemployment benefits, or introducing a small cash bonus for workers that get a new job, may have no effect on unemployment in some cases, while eradicating significant levels of unemployment in other cases. Our analysis suggests that the government my face a Samaritan’s Dilemma if it can influence the recall probability of workers, and that multiple equilibria may exist in a game involving both workers and an unemployment-averse government. Furthermore, we explore a link to the war of attrition literature, showing that the Bulow and Klemperer (1999) ”one too many”-result may not hold if there is uncertainty concerning when the game ends.

Keywords: Structural adjustment; unemployment; recalls; search; war of attrition. (search for similar items in EconPapers)
JEL-codes: D83 J64 R23 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2002-03-14
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Structural Adjustment and Endogenous Worker Recall Probabilities (2002)
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