Unemployment causes significant losses in the quality of life. In addition to reducing individual income, it also creates non-pecuniary, psychological costs. We quantify these non-pecuniary losses by using the life satisfaction approach. In contrast to previous studies, we apply Friedman's...

Critics of marginal wage subsidies claim that their inter-firm displacement effects eliminate their employment and fiscal advantages over general wage subsidies. We develop a model in which we show that the contrary is correct. Inter-firm displacement with marginal subsidies forces down prices...

The game-strategic foundation of the Nash bargaining solution by a Rubinstein (1982) alternating-offers game shows that in wage bargaining models the threat point should be the inside, instead of the outside, option. So far, this insight has been largely ignored in the labor economics...