Equilibria with Unemployment in Segmented Labor Markets

Author/Editor:

Dimitri G Demekas

Publication Date:

April 1, 1990

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

The paper proves four theorems in an n-sector model of a segmented labor market, with search costs, and a continuum of workers with different reservation wages, who can apply to any number of sectors. The main conclusions are that: (i) an equilibrium with unemployment always exists; and (ii) some of the unemployment is involuntary, in the sense that it consists of workers with reservation wages below the equilibrium wage in the secondary market. These conclusions hold in the case of both separate and non-separate markets.

Series:

Working Paper No. 1990/032

Subject:

Labor markets Labor supply Real wages Unemployment Wages

English

Publication Date:

April 1, 1990

ISBN/ISSN:

9781451979602/1018-5941

Stock No:

WPIEA0321990

Pages:

20

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