Department of Economics and Business Economics

Wage–vacancy contracts and multiplicity of equilibria in a directed search model of the labour market

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Wage–vacancy contracts and multiplicity of equilibria in a directed search model of the labour market. / Jacquet, Nicolas L.; Kennes, John; Tan, Serene.

In: Canadian Journal of Economics, Vol. 52, No. 2, 2019, p. 784-821.

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Jacquet, Nicolas L. ; Kennes, John ; Tan, Serene. / Wage–vacancy contracts and multiplicity of equilibria in a directed search model of the labour market. In: Canadian Journal of Economics. 2019 ; Vol. 52, No. 2. pp. 784-821.

Bibtex

@article{d3d7ed1c23e74bf4bd85e9ebb63c9976,
title = "Wage–vacancy contracts and multiplicity of equilibria in a directed search model of the labour market",
abstract = "This paper studies a directed search model of the labour market, which is standard in all aspects except two. First, we allow firms to post wage–vacancy contracts advertising the number of workers they would pay as well as the payment all will receive. Second, we consider two cases: one where workers are risk neutral and one where workers are risk averse, both in finite and large economies. Our paper shows that when firms post wage–vacancy contracts, whether workers are modelled as risk neutral or risk averse matters: the types of symmetric equilibria and the nature of multiplicity of equilibria are different. Somewhat surprisingly, when there are finite numbers of risk-neutral workers and firms, we obtain a finite number of symmetric equilibria, but when workers are risk averse, we obtain a continuum of equilibria. Furthermore, our paper sounds a cautionary note on using large economies as an approximation of finite economies: when workers are risk neutral, the nature of equilibrium is preserved going from a finite to a large economy, but the nature of equilibrium is different when workers are risk averse.",
author = "Jacquet, {Nicolas L.} and John Kennes and Serene Tan",
year = "2019",
doi = "10.1111/caje.12377",
language = "English",
volume = "52",
pages = "784--821",
journal = "Canadian Journal of Economics",
issn = "0008-4085",
publisher = "Wiley-Blackwell Publishing, Inc.",
number = "2",

}

RIS

TY - JOUR

T1 - Wage–vacancy contracts and multiplicity of equilibria in a directed search model of the labour market

AU - Jacquet, Nicolas L.

AU - Kennes, John

AU - Tan, Serene

PY - 2019

Y1 - 2019

N2 - This paper studies a directed search model of the labour market, which is standard in all aspects except two. First, we allow firms to post wage–vacancy contracts advertising the number of workers they would pay as well as the payment all will receive. Second, we consider two cases: one where workers are risk neutral and one where workers are risk averse, both in finite and large economies. Our paper shows that when firms post wage–vacancy contracts, whether workers are modelled as risk neutral or risk averse matters: the types of symmetric equilibria and the nature of multiplicity of equilibria are different. Somewhat surprisingly, when there are finite numbers of risk-neutral workers and firms, we obtain a finite number of symmetric equilibria, but when workers are risk averse, we obtain a continuum of equilibria. Furthermore, our paper sounds a cautionary note on using large economies as an approximation of finite economies: when workers are risk neutral, the nature of equilibrium is preserved going from a finite to a large economy, but the nature of equilibrium is different when workers are risk averse.

AB - This paper studies a directed search model of the labour market, which is standard in all aspects except two. First, we allow firms to post wage–vacancy contracts advertising the number of workers they would pay as well as the payment all will receive. Second, we consider two cases: one where workers are risk neutral and one where workers are risk averse, both in finite and large economies. Our paper shows that when firms post wage–vacancy contracts, whether workers are modelled as risk neutral or risk averse matters: the types of symmetric equilibria and the nature of multiplicity of equilibria are different. Somewhat surprisingly, when there are finite numbers of risk-neutral workers and firms, we obtain a finite number of symmetric equilibria, but when workers are risk averse, we obtain a continuum of equilibria. Furthermore, our paper sounds a cautionary note on using large economies as an approximation of finite economies: when workers are risk neutral, the nature of equilibrium is preserved going from a finite to a large economy, but the nature of equilibrium is different when workers are risk averse.

UR - http://www.scopus.com/inward/record.url?scp=85065391110&partnerID=8YFLogxK

U2 - 10.1111/caje.12377

DO - 10.1111/caje.12377

M3 - Journal article

AN - SCOPUS:85065391110

VL - 52

SP - 784

EP - 821

JO - Canadian Journal of Economics

JF - Canadian Journal of Economics

SN - 0008-4085

IS - 2

ER -