Ingmar Nyman () and
Matthew Baker ()
No 437, Economics Working Paper Archive at Hunter College from Hunter College Department of Economics
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
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Journal Article: Job Hoarding (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:htr:hcecon:437
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