Catching Hipo's: Screening, Wages and Unemployment

Maarten C.W. Janssen ()
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Maarten C.W. Janssen: Erasmus University Rotterdam

No 00-028/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: In this paper, I study the wage a firm sets to attract high abilityworkers (hipo's) in situationsof unemployment. I show that the higher unemployment, the larger afirm's incentives to sorthigh and low ability workers. Moreover, workers will signal their(high) ability in situationsof (high) unemployment only if a job offers a high enough wage. Themain result, therefore,says that a firm sets higher wages, the higher unemployment. As themodel is applicable tothe upper segment of the labour market, the result is in line withthe empirical fact thatincome inequality increases when more people are unemployed.

Keywords: Monopsony Power; Labor Market; Screening (search for similar items in EconPapers)
JEL-codes: C72 D82 J42 (search for similar items in EconPapers)
Date: 2000-04-12
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20000028

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