Equilibrium Unemployment and Wage Formation with Matching Frictions and Worker Moral Hazard

Guillaume Rocheteau

Cahiers de Recherches Economiques du Département d'économie from Université de Lausanne, Faculté des HEC, Département d’économie

Abstract: This paper synthesizes the shirking and the matching approaches of equilibrium unemployment in order to endogenize the wage formation process as a function of labour market conditions. The steady state equilibrium can take two forms depending on wether the no-shirking condition is binding or not. It is demonstrated that the efficiency wage approach is relevant when the unemployment rate is above a certain threshold. Futhermore, an efficiency wage is more likely when the disutility of effort is high, recruiting costs and workers' bargaining power are low, inspections are unlikely and the workers' productivity is weak.

Keywords: equilibrium unemployment; matching model; moral hazard (search for similar items in EconPapers)
JEL-codes: E24 J41 J64 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2000-03
New Economics Papers: this item is included in nep-dge, nep-lab, nep-mic and nep-reg
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Published in Labor Economics, vol. 8 (1), Feb. 2001, pp. 75-102

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http://www.hec.unil.ch/deep/textes/00.07b.pdf (application/pdf)

Related works:
Journal Article: Equilibrium unemployment and wage formation with matching frictions and worker moral hazard (2001)
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Persistent link: https://EconPapers.repec.org/RePEc:lau:crdeep:00.07

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