Evolution of Worker-Employer Networks and Behaviors Under Alternative Non-Employment Benefits

This study uses agent-based computational experiments to examine the effects of a non-employment payoff on network formation and work-site behaviors among workers and employers participating in a sequential employment game with incomplete contracts. Workers either direct work offers to preferred employers or choose unemployment and receive the non-employment payoff. Subject to capacity limitations, employers either accept work offers from preferred workers or remain vacant and receive the non-employment payoff. Matched workers and employers participate in a risky employment relationship modeled as a prisoner's dilemma game. Increases in the non-employment payoff result in higher average unemployment and vacancy rates while at the same time encouraging cooperation among the worker and employers who do form matches. Taking both utility benefits and program costs into account, the highest efficiency is achieved with a moderate non-employment payoff level. A zero payoff encourages too much shirking on the work-site, while a high payoff results in too high a risk of lost earnings due to coordination failure