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    Unobserved heterogeneity, exit rates, and re-employment wages

    Fernández-Blanco, J. and Gomes, Pedro (2016) Unobserved heterogeneity, exit rates, and re-employment wages. The Scandinavian Journal of Economics 119 (2), pp. 375-404. ISSN 0347-0520.

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    Exit rates from unemployment and re-employment wages decline over an unemployment period after controlling for worker observable characteristics. We study the role of unobserved heterogeneity in an economy with asymmetric information and directed search. We show that the unique equilibrium is separating and skilled workers have more job opportunities and higher wages. The composition of the unemployed varies with the duration of unemployment, so average exit rates and wages fall with time. The separating equilibrium relies on performance-related pay schemes and the ability of firms to commit to renting an input that is complementary to the worker skills.


    Item Type: Article
    Keyword(s) / Subject(s): Asymmetric Information, Directed Search, Unemployment Duration
    School: Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School
    Research Centres and Institutes: Applied Macroeconomics, Birkbeck Centre for
    Depositing User: Pedro Gomes
    Date Deposited: 12 Oct 2017 09:34
    Last Modified: 02 Aug 2023 17:36


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