O'Reilly logo

Labor Markets and Business Cycles by Robert Shimer

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

4

Rigid Wages

The search models in chapters 2 and 3 make two significant departures from the frictionless model in chapter 1. The first is of course the introduction of search frictions. In the search model, firms use some of their employees to recruit new workers, and the difficulty of recruiting depends on the ratio of recruiters to unemployed workers. The second departure is the determination of wages. Although perhaps more subtle, this assumption is no less important. In the presence of search frictions, matched workers and firms are in a bilateral monopoly situation. Standard arguments that competitive forces equate the wage both to the marginal rate of substitution between consumption and leisure and to the marginal product of labor are ...

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required