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Job Hoarding

Ingmar Nyman () and Matthew Baker ()

No 437, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics

Abstract: We study a labor market in which principals and agents must search for a trading partner, and agents have private information about the value of a match. We show that competitive pressure can induce agents to lie and over-state the value of the match. This leads to insufficient frictional unemployment and search, and lower average productivity and utility. A fully tax-financed unemployment insurance can therefore eliminate the inefficiency. Moreover, because inefficient “job-hoarding” by workers occurs when there are many workers per job, the analysis provides a novel explanation for the stylized macroeconomic fact that labor productivity is procyclical.

Keywords: Search; Private Information; Competition; Labor Productivity; Unemployment Insurance (search for similar items in EconPapers)
JEL-codes: D24 D82 D83 E32 J64 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta, nep-dge, nep-ias and nep-lab
Date: 2012
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