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How does imperfect competition in the labor market affect unemployment policies?

Wauthy, Xavier and Zenou, Yves (2002) How does imperfect competition in the labor market affect unemployment policies? Journal of Public Economic Theory, 4, (3), pp. 417-436. (doi:10.1111/1467-9779.00106).

Record type: Article


We consider a continuum of workers ranked according to their abilities to acquire education and two firms with different technologies that imperfectly compete in wages to attract these workers. The education cost to be borne by workers is higher in the high-technology firm. In equilibrium, we show that the unemployed workers are those with the lowest initial abilities. We then study different policies that subsidize either education cost or wages. We found that the first-best allocation can only be implemented by selective policies. We analyze second-best nonselective policies and show that, in terms of welfare, subsidizing education costs or wages is strictly equivalent.

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Published date: 2002


Local EPrints ID: 33067
ISSN: 1097-3923
PURE UUID: 84a61ee5-4476-452c-9f02-8ec7300efd31

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Date deposited: 15 May 2006
Last modified: 17 Jul 2017 15:54

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Author: Xavier Wauthy
Author: Yves Zenou

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