Job search costs and incentives

Andriy Zapechelnyuk; Ro'i Zultan

doi:10.1007/s40505-019-00176-2

Job search costs and incentives

Andriy Zapechelnyuk, Ro'i Zultan

Research output: Contribution to journal › Article › peer-review

Abstract

We demonstrate that policies aimed at reducing frictional unemployment may lead
to the opposite results. In a labor market with long-term wage contracts and moral
hazard, any such policy reduces employees’ opportunity costs of staying on a job.
As employees are less worried about losing their job, a smaller share of employees is willing to exert effort, leading to a lower average productivity. Consequently, firms create fewer vacancies, resulting in lower employment and decreased welfare.

Original language	English
Journal	Economic Theory Bulletin
Volume	First Online
Early online date	10 Sept 2019
DOIs	https://doi.org/10.1007/s40505-019-00176-2
Publication status	E-pub ahead of print - 10 Sept 2019

UN SDGs

This output contributes to the following UN Sustainable Development Goals (SDGs)

SDG 8 Decent Work and Economic Growth
SDG 15 Life on Land

Keywords

Job search
Moral hazard
Labor market
Unemployment insurance

Access to Document

10.1007/s40505-019-00176-2

Zapechelnyuk_2019_ETB_Jobsearch_AAM
Copyright © 2019 Society for the Advancement of Economic Theory. This work has been made available online in accordance with publisher policies or with permission. Permission for further reuse of this content should be sought from the publisher or the rights holder. This is the author created accepted manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://doi.org/10.1007/s40505-019-00176-2
Accepted author manuscript, 253 KB

Cite this

@article{3ce89d4a70914493bcd6c14d66223f1c,

title = "Job search costs and incentives",

abstract = "We demonstrate that policies aimed at reducing frictional unemployment may lead to the opposite results. In a labor market with long-term wage contracts and moral hazard, any such policy reduces employees{\textquoteright} opportunity costs of staying on a job. As employees are less worried about losing their job, a smaller share of employees is willing to exert effort, leading to a lower average productivity. Consequently, firms create fewer vacancies, resulting in lower employment and decreased welfare.",

keywords = "Job search, Moral hazard, Labor market, Unemployment insurance",

author = "Andriy Zapechelnyuk and Ro'i Zultan",

year = "2019",

month = sep,

day = "10",

doi = "10.1007/s40505-019-00176-2",

language = "English",

volume = "First Online",

journal = "Economic Theory Bulletin",

issn = "2196-1093",

publisher = "Springer",

}

TY - JOUR

T1 - Job search costs and incentives

AU - Zapechelnyuk, Andriy

AU - Zultan, Ro'i

PY - 2019/9/10

Y1 - 2019/9/10

N2 - We demonstrate that policies aimed at reducing frictional unemployment may lead to the opposite results. In a labor market with long-term wage contracts and moral hazard, any such policy reduces employees’ opportunity costs of staying on a job. As employees are less worried about losing their job, a smaller share of employees is willing to exert effort, leading to a lower average productivity. Consequently, firms create fewer vacancies, resulting in lower employment and decreased welfare.

AB - We demonstrate that policies aimed at reducing frictional unemployment may lead to the opposite results. In a labor market with long-term wage contracts and moral hazard, any such policy reduces employees’ opportunity costs of staying on a job. As employees are less worried about losing their job, a smaller share of employees is willing to exert effort, leading to a lower average productivity. Consequently, firms create fewer vacancies, resulting in lower employment and decreased welfare.

KW - Job search

KW - Moral hazard

KW - Labor market

KW - Unemployment insurance

U2 - 10.1007/s40505-019-00176-2

DO - 10.1007/s40505-019-00176-2

M3 - Article

SN - 2196-1093

VL - First Online

JO - Economic Theory Bulletin

JF - Economic Theory Bulletin

ER -

Job search costs and incentives

Abstract

UN SDGs

Keywords

Access to Document

Fingerprint

Cite this