Jobless Recovering and Equilibrium Involuntary Unemployment with a Simple Efficiency Wage Model

Jinpeng Ma ()

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: The U.S. economy had experienced the "jobless recovering" after the 1990-1991 and 2001 recessions, which has been constantly puzzling the economists, market analysts, and policymakers. This paper uses a simple hiring game in an efficiency wage model framework to resolve that puzzle. Our efficiency wage model emphasizes the importance of the local unemployment rate, which is endogenously determined by firms' hiring decision at a symmetric Nash equilibrium. Our model has a new feature such that nonzero steady involuntary unemployment at equilibrium may coexist with an efficiency wage that stays below the market-clearing wage. Moreover, we show how it is possible to use our model to study income inequality as a result of skill-biased technical change, inter-industry wage differentials, and skill wage premiums. We also demonstrate how it is possible to derive the wage curve (Blanchflower and Oswald (1994)) as an equilibrium locus of our model.

Keywords: Jobless; recovering (search for similar items in EconPapers)
JEL-codes: D0 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2004-02-17
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.sas.rutgers.edu/virtual/snde/wp/2004-04.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200404

Access Statistics for this paper

More papers in Departmental Working Papers from Rutgers University, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by ().