Citation

Discussion Paper Details

Please find the details for DP1914 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Demand Uncertainty, Mismatch and (Un)Employment: A Microeconomic Approach

Author(s): Mohamed Jellal, Jacques-François Thisse and Yves Zenou

Publication Date: July 1998

Keyword(s): Demand Shock, job matching, Unemployment and workers' and firms' heterogeneity

Programme Area(s): Human Resources and Industrial Organization

Abstract: We consider a finite number of firms, which compete imperfectly for heterogeneous workers. Firms produce a homogeneous good, sold on a competitive market, and face demand-induced price fluctuations. It is then shown that unemployment may arise in equilibrium because of both uncertainty of product demand and job mismatch. Unemployment does not arise, however, when the variance of the demand shock is small enough and/or the cost of mismatch is sufficiently low. Full employment always prevails when there is free entry. Hence, unemployment may persist as long as the incumbent firms choose their skill requirements to protect their supranormal profits.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1914

Bibliographic Reference

Jellal, M, Thisse, J and Zenou, Y. 1998. 'Demand Uncertainty, Mismatch and (Un)Employment: A Microeconomic Approach'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1914