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This paper explores the optimal design of subsidies for hiring unemployed workers ('employment vouchers' for short) in the context of a dynamic model of the labor market. Focusing on the short-term and long-term effects of the vouchers on employment and unemployment, the analysis shows how the...
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Do firms reduce employment when their insiders (established, incumbent employees) claim higher wages? The conventional … employees (entrants) receive their reservation wages. The reason given is that an increase in insider wages gives rise to a … countervailing fall in reservation wages, leaving the present value of wage costs unchanged. Our analysis contradicts this …
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