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On the quantitative importance of wage bargaining models
Costain, James S.
Universitat Pompeu Fabra. Departament d'Economia i Empresa
Four general equilibrium search models are compared quantitatively. Thebaseline framework is a calibrated macroeconomic model of the US economydesigned for a welfare analysis of unemployment insurance policy. Theother models make three simple and natural specification changes,regarding tax incidence, monopsony power in wage determination, and therelevant threat point. These specification changes have a major impacton the equilibrium and on the welfare implications of unemploymentinsurance, partly because search externalities magnify the effects ofwage changes. The optimal level of unemployment insurance dependsstrongly on whether raising benefits has a larger impact on searcheffort or on hiring expenditure.
2005-09-15
Microeconomics
wage bargaining
search
matching
unemployment insurance
tax incidence
monopsony
threat point
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