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http://ssrn.com/abstract=1999322
 
 

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Selective Hiring and Welfare Analysis in Labor Market Models


Christian Merkl


Kiel Institute for the World Economy; University of Kiel; Institute for the Study of Labor (IZA)

Thijs Van Rens


University of Warwick - Department of Economics; CEPR; Institute for the Study of Labor (IZA)


IZA Discussion Paper No. 6294

Abstract:     
Firms select not only how many, but also which workers to hire. Yet, in standard search models of the labor market, all workers have the same probability of being hired. We argue that selective hiring crucially affects welfare analysis. Our model is isomorphic to a search model under random hiring but allows for selective hiring. With selective hiring, the positive predictions of the model change very little, but the welfare costs of unemployment are much larger because unemployment risk is distributed unequally across workers. As a result, optimal unemployment insurance may be higher and welfare is lower if hiring is selective.

Number of Pages in PDF File: 29

Keywords: labor market models, welfare, optimal unemployment insurance

JEL Classification: E24, J65

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Date posted: February 4, 2012  

Suggested Citation

Merkl, Christian and van Rens, Thijs, Selective Hiring and Welfare Analysis in Labor Market Models. IZA Discussion Paper No. 6294. Available at SSRN: http://ssrn.com/abstract=1999322

Contact Information

Christian Merkl (Contact Author)
Kiel Institute for the World Economy ( email )
P.O. Box 4309
Kiel, D-24100
Germany
University of Kiel ( email )
Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
Germany
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
Thijs Van Rens
University of Warwick - Department of Economics ( email )
Coventry CV4 7AL
United Kingdom
HOME PAGE: http://www.thijsvanrens.com
CEPR ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
HOME PAGE: http://www.cepr.org/researchers/details/rschcontact.asp?IDENT=158946
Institute for the Study of Labor (IZA) ( email )
P.O. Box 7240
Bonn, D-53072
Germany
HOME PAGE: http://www.iza.org/profile?key=3806

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