Incentives in Competitive Search Equilibrium and Wage Rigidity

Moen, Espen R.; Rosen, Asa

doi:10.2139/ssrn.868467

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Incentives in Competitive Search Equilibrium and Wage Rigidity

30 Pages Posted: 12 Dec 2005

See all articles by Espen R. Moen

Espen R. Moen

Norwegian Business School; Centre for Economic Policy Research (CEPR)

Asa Rosen

Stockholm University - Swedish Institute for Social Research (SOFI); University of Oslo

There are 2 versions of this paper

Date Written: February 7, 2006

Abstract

This paper examines the competitive search equilibrium when the workers' effort choice and type are private information. We derive a modified Hosios rule determining the allocation of resources and analyze how private information influences the responsiveness of the unemployment rate to changes in macroeconomic variables. Most importantly, private information increases the responsiveness of the unemployment rate to changes in the general (type and effort independent) productivity level. If the changes also affect the information structure, the responsiveness of the unemployment rate may be large even if the changes in expected productivity are small.

Keywords: incentives, contracts, unemployment, wage rigidity, labor market search

JEL Classification: J33, J64, J41, E24

Suggested Citation: Suggested Citation

Moen, Espen R. and Rosen, Asa and Rosen, Asa, Incentives in Competitive Search Equilibrium and Wage Rigidity (February 7, 2006). Available at SSRN: https://ssrn.com/abstract=868467 or http://dx.doi.org/10.2139/ssrn.868467