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The Inefficiency of Unemployment: The Supervision Perspective

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  • Guillermo A. Calvo

Abstract

We study an example economy with costly labor monitoring under a wage-cum-supervision arrangement, where workers' utilities are not equalized across sectors (workers are identical to each other). Our main task is to look for (and find) a set of "flat" taxes and subsidies that bring about a Pareto improvement over the laissez-faire solution. We show that any of such welfare-improving schemes involves a tax on labor income from those workers whose utility is the lowest.

Suggested Citation

  • Guillermo A. Calvo, 1985. "The Inefficiency of Unemployment: The Supervision Perspective," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 100(2), pages 373-387.
    • Handle: RePEc:oup:qjecon:v:100:y:1985:i:2:p:373-387.
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    File URL: http://hdl.handle.net/10.2307/1885387
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    Cited by:

    1. Illoong Kwon, 2005. "Threat of Dismissal: Incentive or Sorting?," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 797-838, October.
    2. Michael Waldman, 2012. "Theory and Evidence in Internal LaborMarkets [The Handbook of Organizational Economics]," Introductory Chapters,, Princeton University Press.
    3. Ferruccio Ponzano, 2001. "Efficiency wages and endogenous supervision technology," POLIS Working Papers 23, Institute of Public Policy and Public Choice - POLIS.
    4. Walsh, Frank, 1999. "A Multisector Model of Efficiency Wages," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 351-376, April.
    5. Canegallo, Claudia, 1999. "Funzionamento del mercato del lavoro in presenza di informazione asimmetrica. Una rassegna della letteratura," POLIS Working Papers 8, Institute of Public Policy and Public Choice - POLIS.
    6. George A. Akerlof & Lawrence F. Katz, 1989. "Workers' Trust Funds and the Logic of Wage Profiles," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(3), pages 525-536.
    7. Imelda Flores Vazquez, 2014. "Equilibrium unemployment in the presence of different skill levels in two different regions: Mexico versus Egypt," Letters in Spatial and Resource Sciences, Springer, vol. 7(3), pages 121-131, October.
    8. Bénédicte Reynaud, 1990. "Les modes de rémunération et le rapport salarial," Économie et Prévision, Programme National Persée, vol. 92(1), pages 1-14.
    9. Bhattacharya, Prabir C., 2001. "Aspects of employment and unemployment in a model of the developed and the less developed economies," Economic Modelling, Elsevier, vol. 18(2), pages 297-311, April.
    10. Pier Angelo Mori, 1998. "Task Shifts vs. Termination as Devices for Eliciting Optimal Effort Supply," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 33-65, March.
    11. repec:eee:labchp:v:3:y:1999:i:pb:p:2373-2437 is not listed on IDEAS
    12. Sami Bibi, 2003. "On The Impact of Labor Tax Reforms on Unemployment in Tunisia," Working Papers 0330, Economic Research Forum, revised Oct 2003.
    13. George A. Akerlof & Lawrence F. Katz, 1986. "Do Deferred Wages Dominate Involuntary Unemployment as a Worker Discipline Device?," NBER Working Papers 2025, National Bureau of Economic Research, Inc.

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