Search Frictions, Efficiency Wages and Equilibrium Unemployment | Zendy

Christopher Martin | Zendy; Bingsong Wang | Zendy

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Search Frictions, Efficiency Wages and Equilibrium Unemployment

Author(s) -

Christopher Martin,

Bingsong Wang

Publication year - 2018

Publication title -

review of economic analysis

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.101

H-Index - 1

ISSN - 1973-3909

DOI - 10.15353/rea.v10i1.1507

Subject(s) - unemployment , economics , matching (statistics) , efficiency wage , wage , component (thermodynamics) , involuntary unemployment , decomposition , econometrics , labour economics , macroeconomics , mathematics , statistics , physics , ecology , biology , thermodynamics

This paper explores the decomposition of equilibrium unemployment into involuntary and frictional components using a model that combines efficiency wages with search and matching frictions in the labour market. In deriving our results we generalise the celebrated Solow Condition, expressing the wage as the sum of a pure efficiency wage component and a component that reflects search frictions. Using standard values of calibrated parameters, we find that the bulk of unemployment is involuntary

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