Working Paper: CEPR ID: DP483
Authors: Steve Alpern; Dennis J. Snower
Abstract: This paper shows that when workers have some market power and face substantial uncertainty concerning their productivity, it may be in their interest to formulate their wage claims with a view to the information thereby revealed. This learning behaviour may in turn be responsible for unemployment. Our analysis shows how the process of information acquisition through wage claims generates a higher rate of youth unemployment and long-term unemployment and a lower probability of dismissal for incumbent workers than would otherwise be the case.
Keywords: unemployment; learning; wage information
JEL Codes: 022; 023; 026; 821
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Uncertainty about productivity (D89) | Wage claims reveal information about MRPs (J38) |
| Wage claims reveal information about MRPs (J38) | Higher youth unemployment (J68) |
| Wage claims reveal information about MRPs (J38) | Higher long-term unemployment (J64) |
| Wage claims reveal information about MRPs (J38) | Lower dismissal probabilities for incumbents (J63) |
| Increased uncertainty about productivity (D89) | Higher equilibrium unemployment rate (J64) |
| Higher equilibrium unemployment rate (J64) | Higher youth unemployment (J68) |
| Higher equilibrium unemployment rate (J64) | Higher unemployment rate among senior outsiders (J68) |
| Higher unemployment rate among senior outsiders (J68) | Higher unemployment rate among incumbents (J64) |