DP483 Unemployment through `Learning from Experience'

Author(s): Steve Alpern, Dennis J. Snower
Publication Date: November 1990
Keyword(s): Learning, Unemployment, Wage Information
JEL(s): 022, 023, 026, 821
Programme Areas: Applied Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=483

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.