Ranking, Unemployment Duration, and Wages

Olivier Blanchard and Peter Diamond

No 3387, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Firms often receive multiple acceptable applications for vacancies, requiring a choice among candidates. This paper contrasts equilibria when firms select workers at random and when firms select the worker with the shortest spell of unemployment, called ranking. With the filling of vacancies unaffected by the selection rule, both equilibria have the same aggregate dynamics, but different distributions of unemployment durations. With the threat point for the Nash bargained wage being a worker with zero unemployment duration, the wage with ranking is much more sensitive to changes in the tightness of the labor market. The same holds for efficiency wages.

Date: 1990-06
Note: EFG
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Citations: View citations in EconPapers (15)

Published as Review of Economic Studies, Vol. 61-3 No. 208, July 1994, pp. 417-434.

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Related works:
Journal Article: Ranking, Unemployment Duration, and Wages (1994)
Working Paper: RANKING, UNEMPLOYMENT DURATION, AND WAGES (1990)
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