Working Paper: CEPR ID: DP5554
Authors: Espen R. Moen; Åsa Rosen
Abstract: This paper examines competitive search equilibrium when workers' effort choice and 'type' are private information. We derive a modified Hosios Rule determining the allocation of resources, and analyze how private information influences the responsiveness of the unemployment rate to changes in macroeconomic variables. Most importantly, private information increases the responsiveness of the unemployment rate to changes in the general (type- and effort independent) productivity level. If the changes also affect the information structure, the responsiveness of the unemployment rate may be large, even if the changes in expected productivity are small.
Keywords: private information; search; unemployment; wage rigidity
JEL Codes: E30; J30; J60
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| private information (D82) | unemployment responsiveness (J64) |
| negative change in productivity (O49) | match surplus (H62) |
| negative change in productivity (O49) | constraints imposed by workers' private information (J79) |
| constraints imposed by workers' private information (J79) | employment rents (J39) |
| employment rents (J39) | unemployment responsiveness (J64) |
| private information (D82) | wage responsiveness (J38) |
| input price changes (E31) | unemployment responsiveness (J64) |