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Structural adjustment and endogenous worker recall probabilities

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Abstract

In this paper we investigate the incentives of unemployed workers to wait for a recall when recall probabilities are endogenously determined by the waiting decisions of others. Because of a positive externality that arise when workers seek new employment, an excessive number of workers choose to wait for a recall, and structural adjustment is slow. We also find that a small reduction in the unemployment benefits, or introducing a small cash bonus for workers that get a new job, may have no effect on unemployment in some cases, while eradicating significant levels of unemployment in other cases. Our analysis suggests that the government my face a Samaritan’s Dilemma if it can influence the recall probability of workers, and that multiple equilibria may exist in a game involving both workers and an unemployment-averse government. Furthermore, we explore a link to the war of attrition literature, showing that the Bulow and Klemperer (1999) ”one too many”-result may not hold if there is uncertainty concerning when the game ends.

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  • Meland, Frode & Torsvik, Gaute, 2002. "Structural adjustment and endogenous worker recall probabilities," Working Papers in Economics 06/02, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2002_006
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 1982. "Job Search and the Duration of Layoff Unemployment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 97(4), pages 595-612.
    2. Lawrence F. Katz, 1986. "Layoffs, Recall and the Duration of Unemployment," NBER Working Papers 1825, National Bureau of Economic Research, Inc.
    3. Paul Klemperer & Jeremy Bulow, 1999. "The Generalized War of Attrition," American Economic Review, American Economic Association, vol. 89(1), pages 175-189, March.
    4. Bruce D. Meyer, 1995. "Lessons from the U.S. Unemployment Insurance Experiments," Journal of Economic Literature, American Economic Association, vol. 33(1), pages 91-131, March.
    5. Clark, Derek J & Riis, Christian, 1996. "A Multi-winner Nested Rent-Seeking Contest," Public Choice, Springer, vol. 87(1-2), pages 177-184, April.
    6. Lawrence F. Katz & Bruce D. Meyer, 1990. "Unemployment Insurance, Recall Expectations, and Unemployment Outcomes," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(4), pages 973-1002.
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    Cited by:

    1. Lukach, R. & Plasmans, J.E.J., 2002. "Measuring Knowledge Spillovers using Patent Citations : Evidence from the Belgian Firm's Data," Other publications TiSEM d78bf59a-e0ff-4451-86b9-1, Tilburg University, School of Economics and Management.

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    More about this item

    Keywords

    Structural adjustment; unemployment; recalls; search; war of attrition.;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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