Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 225 Abstract:
A model of a labor market is developed in which agents possess private information about their own productivities. This has the property that firms may use unemployment to create appropriate self-selection incentives. When this is the case, existence of an equilibrium may require that employment be stochastic. This is true even though all uncertainty is necessarily resolved prior to hiring. Even when existence is not at issue, it may be privately as well as socially desirable to randomize employment prospects. Finally, it is argued that this "adverse selection" approach is consistent with traditional "Keynesian" approaches to macroeconomics, but avoids some of the arbitrary features of several "Keynesian models."
Stichwort: Random employment, Labor, Randomized employment, and Private information Fach: D83 - Information, knowledge, and uncertainty - Search ; Learning ; Information and knowledge ; Communication ; Belief and J64 - Mobility, unemployment, and vacancies - Unemployment : Models, duration, incidence, and job search
Creator: Smith, Bruce D., d. 2002. Series: Working paper (Federal Reserve Bank of Minneapolis. Research Dept.) Number: 230 Abstract:
An overlapping generations model is developed that contains labor markets in which adverse selection problems arise. As a response to these problems, quantity rationing of labor occurs. In addition, the model is capable of generating (a) random employment and prices despite the absence of underlying uncertainty in equilibrium; (b) a statistical (nondegenerate) Phillips curve; (c) procyclical movements in productivity; (d) correlations between aggregate demand and unemployment (and output); (e) an absence of correlation between unemployment (employment) and real wages. In addition, the Phillips curve obtained typically has the "correct" slope. Finally, the model reconciles the theoretical importance and observed unimportance of intertemporal substitution effects, and explains why price level stability may be a poor policy objective.
Stichwort: Money, Prices, Unemployment, Productivity, Labor, and Philips curve Fach: E12 - General aggregative models - Keynes ; Keynesian ; Post-Keynesian, E24 - Macroeconomics : Consumption, saving, production, employment, and investment - Employment ; Unemployment ; Wages ; Intergenerational income distribution ; Aggregate human capital, and E32 - Prices, business fluctuations, and cycles - Business fluctuations ; Cycles