Incentives in Competitive Search Equilibrium and Wage Rigidity

Moen, Espen R.; Rosen, Asa

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Incentives in Competitive Search Equilibrium and Wage Rigidity

CEPR Discussion Paper No. 5554

32 Pages Posted: 26 Jun 2006

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: March 2006

Abstract

This paper examines competitive search equilibrium when 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: Private information, search, unemployment, wage rigidity

JEL Classification: E30, J30, J60

Suggested Citation: Suggested Citation

Moen, Espen R. and Rosen, Asa and Rosen, Asa, Incentives in Competitive Search Equilibrium and Wage Rigidity (March 2006). CEPR Discussion Paper No. 5554, Available at SSRN: https://ssrn.com/abstract=912245