30 Questions
What is the flow of workers from employment to unemployment in a given period?
𝑠(1 − 𝑈)
What is the condition for long-run equilibrium in the search model of unemployment?
The flow of workers from employment to unemployment is equal to the flow of workers from unemployment to employment
What is the purpose of the reservation wage in the search model of unemployment?
To determine the acceptable wage for an unemployed worker
What is the effect of an increase in the separation rate, s, on the unemployment rate, U?
The unemployment rate will increase
What is the fraction of the unemployed who receive a job offer and are offered a wage greater than their reservation wage?
H(𝑤 ∗ )
What is the flow of workers from unemployment to employment in a given period?
𝑈𝑝𝐻(𝑤 ∗ )
What happens to the welfare of the unemployed when p2 increases?
It increases from Vu to Vu
What is the effect of an increase in p on the flow of workers from unemployment to employment?
It has both direct and indirect effects, leading to an uncertain outcome
What happens to the reservation wage when p2 increases?
It increases from w1* to w2*
What is the implication of the model for government policy?
The government's policy may be counterproductive if its goal is to decrease the unemployment rate
What is the effect of an increase in p on the unemployment rate in the long-run equilibrium?
It may either increase or decrease the unemployment rate, depending on the indirect effect
What is the meaning of UpH(w*) in the context of the model?
The flow of workers from unemployment to employment
What determines the labour market tightness j, according to equation (13)?
The wage w, productivity z, and the cost of posting a vacancy k
What is the total output produced when a firm is matched with a worker?
z units of output
What is the primary factor in the Nash bargaining solution that determines the wage agreement?
The relative bargaining power of the firm and the worker
What is the alternative concept to average labor productivity in this model?
Total factor productivity
What is the term for the collective gain of the firm and the worker from coming to an agreement?
Total surplus
Which economist is credited with developing the bargaining theory used in this model?
John Nash
What is the total surplus in the two-sided search model of unemployment?
$z - b$
What is the bargaining power of the worker represented by?
$a$
What is the worker's surplus in terms of the total surplus?
$a(z - b)$
What is the firm's surplus in the two-sided search model of unemployment?
$z - w$
What is the value of the worker's share of the total surplus if the worker and firm have equal bargaining power?
$a = 1/2$
What is the equation that determines the wage in the two-sided search model of unemployment?
$w = az + (1 - a)b$
What is the ratio of firms searching for workers relative to consumers searching for work, according to the two-sided search model of unemployment?
𝐴/𝑄
What is the probability of being unemployed if a consumer chooses to search for work, according to Equation (10)?
1 - 𝑒𝑚(1, 𝑗)
What is the supply curve for the number of consumers choosing to search for work, 𝑄, defined by?
𝑃(𝑄) = 𝑏 + 𝑝𝑐(𝑤 - 𝑏)
What is the expected payoff a consumer receives from searching for work, in equilibrium?
𝑏 + 𝑝𝑐(𝑤 - 𝑏)
What is the function of the matching function, according to the CRS property?
𝑒𝑚(1, 𝐴/𝑄)
What is the variable 𝑤, in the context of the two-sided search model of unemployment?
The wage offered by firms
Learn about the one-sided search model of unemployment and how it determines the long-run rate of unemployment. This model explains the flows between employed and unemployed workers and the factors affecting the reservation wage. Test your understanding of this key concept in microeconomics.
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