Citation

Discussion Paper Details

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Title: Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach

Author(s): Assar Lindbeck and Dennis J. Snower

Publication Date: September 1987

Keyword(s): Cooperation, Harassment, Insiders, Outsiders, Turnover, Unemployment and Wages

Programme Area(s): Applied Macroeconomics

Abstract: We present a theory of involuntary unemployment which explains why the unemployed workers ("outsiders") are unable or unwilling to find jobs even though they are prepared to work for less than the prevailing wages of incumbent workers ("insiders"). The outsiders do not underbid the insiders since, were they to do so, the insiders would withdraw cooperation from them and make their work unpleasant (i.e. "harass" them), thereby reducing the productivity and increasing the reservation wages of the underbidders. The resulting labor turnover costs create economic rent which the insiders tap in wage-setting and, as a result, involuntary unemployment may arise.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=196

Bibliographic Reference

Lindbeck, A and Snower, D. 1987. 'Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=196