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(c): In two-sided model, when a worker and firm are matched, what determines the wage paid to the worker?

(c): In two-sided model, when a worker and firm are matched, what determines the wage paid to the worker?

Microeconomics: Private and Public Choice (MindTap Course List)
Microeconomics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN:9781305506893
Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Chapter13: Earnings, Productivity, And The Job Market
Section: Chapter Questions
Problem 11CQ
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[economics] Two-sided model of unemployment question :)

Unemployment Two-sided model: (c): In two-sided model, when a worker and firm are matched, what determines the wage paid to the worker? Reference notes: Tow-sideed search model of Unemployment: • Let Q be interpreted as labor force, and MQ as those working age people not in the labor force. • Let P (Q) define a supply curve for workers who choose to search for market work. Thus, P. (Q) represents the expected payoff to searching for market work that would induce Q consumers to search. expected ↑ payoff bt elej-b Q Q •If the expected payoff from searching is higher this induces more consumers to forego home production to search for market work. *Let A denote the number of active firms, which is the number that choose to post vacancies. • Letk denotes the cost of firms for recruiting workers. Equilibrium •The worker will receive a surplus of w- b. the firm's surplus is z- un which is the profit the farm makes. Then, if we add the worker's surplus and the firm's surplus, we obtain total surplus, which is z - b. a represents the bargaining power of the worker.. w-b= a(z-b) ⇒w= a(z-b) +b a 1-a W worker surplus firm surplus. • P₁a) = 6 + ex(1. j)a(z-b). k • em ( + 1) = (1-A) (2-6) • Unemployment rate : 4 = 2(1-2) AL1-902 • Jacconcy rate : v=1 = 1- em(1.3) Pias 9 = (1-4)2-1 = 1- em -em ( F.1). Q Pia) = 6 + em(1. j)a(z-b) _eal f.11.
Transcribed Image Text:Unemployment Two-sided model: (c): In two-sided model, when a worker and firm are matched, what determines the wage paid to the worker? Reference notes: Tow-sideed search model of Unemployment: • Let Q be interpreted as labor force, and MQ as those working age people not in the labor force. • Let P (Q) define a supply curve for workers who choose to search for market work. Thus, P. (Q) represents the expected payoff to searching for market work that would induce Q consumers to search. expected ↑ payoff bt elej-b Q Q •If the expected payoff from searching is higher this induces more consumers to forego home production to search for market work. *Let A denote the number of active firms, which is the number that choose to post vacancies. • Letk denotes the cost of firms for recruiting workers. Equilibrium •The worker will receive a surplus of w- b. the firm's surplus is z- un which is the profit the farm makes. Then, if we add the worker's surplus and the firm's surplus, we obtain total surplus, which is z - b. a represents the bargaining power of the worker.. w-b= a(z-b) ⇒w= a(z-b) +b a 1-a W worker surplus firm surplus. • P₁a) = 6 + ex(1. j)a(z-b). k • em ( + 1) = (1-A) (2-6) • Unemployment rate : 4 = 2(1-2) AL1-902 • Jacconcy rate : v=1 = 1- em(1.3) Pias 9 = (1-4)2-1 = 1- em -em ( F.1). Q Pia) = 6 + em(1. j)a(z-b) _eal f.11.
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