Incentives in Competitive Search Equilibrium
2011 (English)In: The Review of Economic Studies, ISSN 0034-6527, E-ISSN 1467-937X, Vol. 78, no 2, 733-761 p.Article in journal (Refereed) Published
This paper proposes a labour market model with job search frictions where workers have private information on match quality and effort. Firms use wage contracts to motivate workers. In addition, wages are also used to attract employees. We define and characterize competitive search equilibrium in this context, and show that it satisfies a simple modified Hosios rule. We also analyse the interplay between macroeconomic variables and optimal wage contracts. Finally, we show that private information may increase the responsiveness of the unemployment rate to changes in the aggregate productivity level and, in particular, to changes in the information structure.
Place, publisher, year, edition, pages
2011. Vol. 78, no 2, 733-761 p.
Private information, Incentives, Search, Unemployment, Wage rigidity
IdentifiersURN: urn:nbn:se:su:diva-56934DOI: 10.1093/restud/rdq011ISI: 000288801800011OAI: oai:DiVA.org:su-56934DiVA: diva2:413992