Table Of ContentADVANCES IN THE THEORY AND
MEASUREMENT OF UNEMPLOYMENT
Also by Gideon Fishelson
ECONOMIC COOPERATION IN THE MIDDLE EAST
RESIDENTIAL FUEL POLICY AND THE ENVIRONMENT
(with A. C. Cohen and I. L. Gardner)
Advances in the Theory
and MeasurelDent of
Unemployment
Edited by
Yoram Weiss
Professor of Economics
Tel-A viv University
and
Gideon Fishelson
Professor of Economics
Tel-A viv University
Palgrave Macmillan
ISBN 978-1-349-10690-5 ISBN 978-1-349-10688-2 (eBook)
DOI 10.1007/978-1-349-10688-2
© Yoram Weiss and Gideon Fishelson 1990
Softcover reprint ofthe hardcover 1st edition 1990 978-0-333-48695-5
All rights reserved. For information, write:
Scholarly and Referenee Division,
St. Martin's Press, Ine., 175 Fifth Avenue, New York, N.Y. 10010
First published in the United States of Ameriea in 1990
ISBN 978-0-312-02797-1
Library of Congress Cataloging-in-Publication Data
Advanees in the theory and measurement of unemploymentl edited by
Yoram Weiss and Gideon Fishelson.
p. em.
"Proceedings of the Sapir Conferenee on Unemployment that was held
at Te1-Aviv University, Tel-Aviv, Israel, on 8-9 June 1987. The
Conferenee was sponsored by the Sapir Center for Development, at Tel
Aviv University"-Pref.
ISBN 978-0-312-02797-1: $49.95 (est.)
1. Unemployment-Congress. 2. Unemployment-Statistieal
methods-Congresses. I. Weiss, Yoram. 11. Fishelson, Gideon.
IH. Sapir Conference on Unemployment (1987 : Tel-Aviv University)
IV. Merkaz le-fituah'al-shem P. Sapir.
HD5707.5.A296 1990
331.13'7--de20 89--6177
CIP
Contents
List of Figures vii
Notes on the Contributors viii
List of Participants xi
Introduction xii
Part One Search Unemployment: Theory and
Measurement
Summary 3
1 Search, Applications and Vacancies 5
Steven Stern
2 A Stigma Theory of Unemployment Duration 20
Elazar Berkovitch
3 A Structural Model of Unemployment Insurance
Benefit Effects on the Incidence and Duration of
Unemployment 57
Dole T. Mortensen
4 On the Estimation of Labour Force Participation, Job
Search and Job Matching Models, Using Panel Data 82
Zvi Eckstein and Kenneth l. Wolpin
5 Unemployment Behaviour: Evidence From the CPS
Work Experience Survey 113
Thomas S. Coleman
Part Two Efficiency Wages and Unemployment
Summary 157
6 Why Do Firms Monitor Workers? 159
William T. Dickens, Laurence F. Katz, Kevin Lang and
Laurence H. Summers
vi Contents
7 Do Deferred Wages Eliminate the Need for
Involuntary Unemployment as a Worker Discipline
Device? 172
George A. Akerlof and Laurence F. Katz
8 Efficiency Wages Reconsidered: Theory and Evidence 204
Kevin M. Murphy and Robert H. Topel
Part Three Unions, Government and Unemployment
Summary 243
9 Job Security and Unemployment 245
Edward P. Lazear
10 The Classical Unemployment Hypothesis and
International Comparisons of Labour Market
Behaviour 268
John Pencavel
11 Is Unemployment Lower if Unions Bargain Over
Employment? 302
Reihard Layard and Stephen Nickell
12 The Persistence of Unemployment in a Dynamic
Insider-Outsider Model 323
Allan Drazen and Nils Gottfries
Index 337
List of Figures
2.1 Equilibrium points 13
3.1 Reservation wage rates 99
4.1 Reservation wages for search and labour force
participation 199
5.1 Density of months unemployed 117
8.1 Optimal job assignment and compensation: two tasks 216
8.2 Optimalcompensationandjobassignment,multipletasks 224
9.1 Constrained and unconstrained demands for labour 250
11.1 Partial equilibrium analysis ofthe representative firm 308
11.2 General equilibrium analysis of the representative firm 309
11.3 The rationale for Nash bargaining 310
vii
Notes on the Contributors
George A. Akerlof is Professor of Economics at the University of
California, Berkeley. His current fields of research include macro-
economics, labour economics and behavioural economics. He has
coedited Efficiency Wage Models in the Labour Market.
Elazar Berkovitch is Assistant Professor of Economics, Graduate
School of Business at the University of Michigan. His areas of
research include finance, labour economics and applied bargaining
theory. He has recently published 'Implicit Labour Contracts to
Explain Turnover'.
Thomas S. Coleman is Assistant Professor of Economics at SUNY at
Stony Brook, New York. His areas of research are finance and labour
economics.
William T. Dickens is Associate Professor of Economics at the
University of California, Berkeley. His areas of research include
wage differentials and theories of wage determination. Among his
publications are 'Inter-industry Wage Differences and Industry Charac-
teristics', and 'The Re-emergence of Segmented Labor Market
Theory'.
Allan Drazen is Senior Lecturer of Economics at Tel-Aviv Univer-
sity. His research areas are macroeconomics and international econ-
omics. His recent publications include 'The Variable Employment
Elasticity Hypothesis: Theory and Evidence' and 'Cyclical Determi-
nants of the Natural Level of Economic Activity'.
Zvi Eckstein is Senior Lecturer of Economics at Tel-Aviv University.
His areas of research are applied econometrics, macroeconomics,
and labour economics. Among his recent publications are 'Fertility
Choice and the Malthusian Hypothesis' and 'University Policies
under Varying Market Conditions: The Training of Electrical Engi-
neers'.
Nils Gottfries is Research Fellow at the Institute for International
Economic Studies at the University of Stockholm. His area of re-
viii
Notes on the Contributors ix
search is macroeconomics, especially wage and price determination
from a macro perspective. He has recently published 'Wage Forma-
tion and Persistence of Unemployment'.
Laurence F. Katz is Assistant Professor of Economics at Harvard
University. His areas of research are labour economics and
macroeconomics. He has recently published 'Some Recent Develop-
ments in Labor Economics and their Implications for Macroecon-
omics' and 'Efficiency Wage Theories: A Partial Evaluation'.
Kevin Lang is Associate Professor of Economics, Boston University.
His area of research is labour economics. He is co-editor of Unem-
ployment and the Structure of Labor Markets.
Reihard Layard is Professor of Economics at the London School of
Economics. His current areas of research include unemployment,
wage inflation, wage structure and social security. He has contributed
to and edited two recent books on unemployment: How to Beat
Unemployment, and The Rise in Unemployment.
EdwardP. Lazear is Professor of Urban and Labor Economics,
Graduate School of Business, University of Chicago. His research is
mainly in labour economics. He is editor of the Journal of Labor
Economics. His recent papers include 'Pay Equality and Industrial
Politics' and 'Salaries and Piece Rates'.
Dole T. Mortensen is Professor of Economics at Northwestern Uni-
versity. His areas of research are information theory and labour
economics. Among his recent publications are 'Job Search and Labor
Market Analysis' and 'Matching: Finding a Partner for Life or
Otherwise' .
Kevin M. Murphy is a Professor of Economics, Graduate School of
Business, at the University of Chicago. His main area of research is
labour economics. Among his recent publications are 'Cohort Size
and Earnings in the United States' and 'A Theory of Rational
Addiction' .
Stephen Nickell is Professor of Economics at the University of Ox-
ford. His areas of research include labour economics, macroecon-
omics and microeconometrics. His recent publications include
