The Limited Influence of Unemployment on the Wage Bargain / Robert E. Hall, Paul R. Milgrom.

Format:

Book

Author/Creator:

Hall, Robert E.

Contributor:

National Bureau of Economic Research.

Milgrom, Paul R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w11245.

NBER working paper series no. w11245

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2005.

Summary:

When a job-seeker and an employer meet, find a prospective surplus, and bargain over the wage, conditions in the outside labor market, including especially unemployment, may be irrelevant. The job-seeker's threat point in the bargain is to delay bargaining, not to terminate bargaining and resume search at other employers. Similarly, the employer's threat point is to delay bargaining, not to terminate it. Consequently, the outcome of the bargain depends on the relative costs of delay to the parties, not on the results of irrational threats to disclaim any bargain. In a model of the labor market that otherwise adopts all of the features of the standard Mortensen-Pissarides model, unemployment is much more sensitive to changes in productivity than in the standard model, because feedback through the wage is absent. We also present models where the wage bargain is in partial contact with conditions in the labor market.

Notes:

Print version record

April 2005.